Mineral rights royalities

Forum|Forum|5 years ago
February 21, 2021
1 reply
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In previous years, TurboTax would let you decline taking the depletion allowance. This year, you can't -- once you enter the info from 1099-MISC, the depletion is figured and entered. I don't necessarily want the depletion. Am I wrong -- didn't TurboTax change this from last year? Plus, my mom is entitled to the same depletion deduction/credit but she uses TT Deluxe and when TT figured her taxes, she didn't get it (no deduction/credit).

MaryM428

Level 11

TurboTax should not be asking for depletion unless you are in the business of drilling for gas or oil.. Delete the royalty that you entered and enter it again following these steps.

Federal
Wages and Income
Your 2020 Income Summary
1099-MISC and Other Common Income
Income from Form 1099-MISC - Start or Update
Let's get the info from your 1099-MISC
Fill in Payer, Federal ID Number, and Box 2 - Continue
Source of 1099-MISC Income - Select Investment income from property you own
Select the rental or royalty that generated this income of $xx

Rates PayerAuthor

Level 3

Yes -- I've done all of this. But there is no question in the TT interview screens about whether I am a business. (I am not.) TT Premium is figuring a depletion on its own -- automatically, where I want it or not. I notice that the TT Deluxe version asks the right question about being a business. But not TT Premier. Maybe this is a glich in the software this year. Help!

KathrynG3

Level 14

When I tested entering Form 1099-MISC separately as an oil, gas minerals or copyrights or patents royalty on Form 1099-MISC, I had to then go to the Rental section.

I did see the depletion automatically calculated. But, where the depletion expense was then listed, I could click the trash can icon next to it to delete it.

If you are saying you do not have this option at all, I recommend deleting Form 1099-MISC and re-entering it.

Depletion is automatically calculated at 15% and is not subject to self-employment tax when reported on Schedule E. Without knowing the full context of your circumstances for the mineral rights, it may or may not be appropriate to decline this expense.

For more information, see Publication 525 Taxable and Nontaxable income re: Depletion

Publication 535 Business Expenses: Who Can Claim Depletion?