Gas & Oil Bonus lease payments and royalty payments

[Ohio1]

Can you please tell me if property taxes and mortgage interest are considered deductible costs? I understand that post cost deductions and depletion are but am not sure about taxes and interest. 

[ErnieS0]

Yes. You can deduct all ordinary and necessary expenses for managing your property, such as taxes, interest, repairs, insurance, management fees, agents' commissions, and depletion.

[Ohio1]

Even if the costs were more than the Royalty payments? I am concerned about the mortgage interest since it is associated with both my house and land.  Also, are real estate taxes and interest deductible for a lease sign on bonus where there is no gas extraction yet?  

[DaveF1006]

Yes, according to Super Awesome Agent IsabellaG in this link, Lease bonus payments are considered income and reported as separate items in the rental/royalty section. You can deduct all taxes and interest against that income even if there hasn't been any extraction activity.

As far as the mortgage interest, you would only claim the mortgage interest for the land and not the house.

[Ohio1]

Is there a way to decipher a percentage of property taxes and mortgage interest for the land only? The 1098 does not distinguish between the house and land, the loan is for both.

[MarilynG1]

If your Property Tax Bill does not split out values between Home and Land (may say Improved/Unimproved), you may need to get an appraisal.

If it does, use the same % between Land/Home as shown on your tax bill.

Click this link for more info on Splitting Home and Land Values.