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March 19, 2024
Question

Other deductions to passive oil and gas royalties

  • March 19, 2024
  • 1 reply
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I have 1099 MISC's from oil and gas operators which have expense amounts for other deductions. what expense category should I put them under on fr the Schedule E. If I put it under Miscellaneous Expenses. It is transferred as a rental expense to my California taxes.

    1 reply

    March 20, 2024

    It sounds as though you've entered these royalties on a TurboTax "path" that recognizes them, and related expenses, as rents. 

    Go ahead and delete the royalty data you've entered in the federal portion of your return, then enter it like this in TurboTax Online:

    1. Select Tax Home in the left pane
    2. On the Hi, let's keep working on your taxes! screen, select the dropdown to the right of Income & Expenses
    3. Select StartPick up where you left off or Review/Edit, as appropriate
    4. Scroll down and select the dropdown to the right of Rentals, Royalties, and Farm
    5. Select  Start or Revisit to the right of Rental Properties and Royalties (Sch E)
    6. Answer  Yes on the Did you have any income from rentals or royalties? page 
    7. On any ensuing screens, such as What are you here to report?, make sure you specify that you're entering Royalty income
    8. On the  We'll start with some basic info on your royalty and following screens, enter your relevant data
    9. On the  Review your royalty info screen, make any edits if necessary, then select Looks good
    10. Continue through the royalty interview until you get to the What additional expenses and assets did you have for Royalty for [California]? screen.  Select all boxes that are relevant, then select Continue

    Once you've entered these expenses, they'll be associated with your royalty income, and should flow over to your California return appropriately.

    If you're using the desktop version of TurboTax, the screens may have different titles, but the path will work similarly.