Oil & Gas Royalties Passive Income Allowed Expenses

Forum|Forum|1 year ago
November 18, 2024
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I own and reside on a residential property and receive Oil & Gas Royalties (documented via 1099-MISC, Box 2). May I expense my mortgage interest and real estate tax on Schedule E?

Best answer by DaveF1006

No, that should not make a difference. You are only concerned about reporting the royalty from the lease and the only expenses you may deduct are intangible drilling and development costs, operating expenses, geological and geophysical expenses, production taxes, and depletion expenses. in other words, any direct expense related to the operation of the oil and gas lease.

DaveF1006

No. The oil and gas property is on your land separate from your residential property.

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49userAuthor

Thank you for your reply.

Perhaps I wasn't clear ... It is my residential property (with a mortgage and property taxes) that is receiving the oil & gas royalties. There is not a separate property account with the county or state for an oil & gas property. Does this make a difference?