Capital gains tax question

[crsintexas]

I am retired and have not had to pay taxes for the last three years. This year I sold mineral royalties for

$230,000.00. Can you tell me what my taxes will be and should I pay estimated tax to avoid penalties?

[tagteam]

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@crsintexas wrote:

I am retired and have not had to pay taxes for the last three years. This year I sold mineral royalties for

$230,000.00. Can you tell me what my taxes will be and should I pay estimated tax to avoid penalties?

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You can avoid the penalty for underpayment of estimated tax if you owe less than $1,000 in tax for 2019, or if you pay at least 90% of the tax owed for 2019 or 100% of the tax shown on your return for 2018, whichever is smaller. 

In sum, you would not be required to pay estimated taxes if you had no tax liability for the last year.

See https://www.irs.gov/businesses/small-businesses-self-employed/estimated-taxes

You can use the site below to estimate your income tax liability based upon your royalty and other income.

https://turbotax.intuit.com/tax-tools/calculators/taxcaster/

[imardr1]

Your Royalties will be federally taxed as earned income.  If your state has an state income tax, it will most likely be taxed as the earned income as well, you'll need to check to see what that rate is.

Both the federal and the state are going to want their tax payment prepaid.  If you wait until April 15, 2020 to file and pay the taxes, you will be penalized and pay interest for every month it was not paid.

Here is a Tax rate calculator:

https://www.mortgagecalculator.org/calcs/marginal-tax-rate-calculator.php

[tagteam]

Royalties from mineral rights are generally exempt from self-employment taxes.

With respect to estimated taxes:

You don’t have to pay estimated tax for the current year if you meet all three of the following conditions.

• You had no tax liability for the prior year
• You were a U.S. citizen or resident for the whole year
• Your prior tax year covered a 12-month period