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To enter royalty income in the TaxAct® program (see the additional information below for instructions on which schedule to use):

  1. From within your TaxAct return (Online or Desktop), click on the Federal tab. On smaller devices, click the menu icon in the upper left-hand corner, then select Federal.
  2. Click Form 1099-MISC to expand the category and then click 2-Royalties
  3. Select which schedule you would like to use. This will take you to the Schedule C or Schedule E section of the program.
  4. Click Add to create a new copy of the schedule, or click Review to review a copy you have already created
  5. The program will proceed with the interview questions for you to enter or review the appropriate information

Alternatively, you can go directly to the Schedule E or Schedule C section of the program.

Schedule E:

  1. From within your TaxAct return (Online or Desktop), click on the Federal tab. On smaller devices, click the menu icon in the upper left-hand corner, then select Federal.
  2. Click Rent or Royalty Income to expand the section, then click Royalties
  3. Click Add to create a new copy of the Schedule E, or click Review to review a copy already created
  4. The program will proceed with the interview questions for you to enter or review the appropriate information

Schedule C:

  1. From within your TaxAct return (Online or Desktop), click on the Federal tab. On smaller devices, click the menu icon in the upper left-hand corner, then select Federal.
  2. Click Business Income to expand the section, then click Business income or loss from a sole proprietorship
  3. Click Add to create a new copy of the Schedule C, or click Review to review a copy already created
  4. The program will proceed with the interview questions for you to enter or review the appropriate information

 

Additional Information


Per IRS Publication 525 Taxable and Nontaxable Income, page 16:

Royalties. Royalties from copyrights, patents, and oil, gas, and mineral properties are taxable as ordinary income.

In most cases, you report royalties on Schedule E (Form 1040), Supplemental Income and Loss. However, if you hold an operating oil, gas, or mineral interest or are in business as a self-employed writer, inventor, artist, etc., report your income and expenses on Schedule C or Schedule C-EZ (Form 1040).

Copyrights and patents. Royalties from copyrights on literary, musical, or artistic works, and similar property, or from patents on inventions, are amounts paid to you for the right to use your work over a specified period of time. Royalties generally are based on the number of units sold, such as the number of books, tickets to a performance, or machines sold.

Oil, gas, and minerals. Royalty income from oil, gas, and mineral properties is the amount you receive when natural resources are extracted from your property. The royalties are based on units, such as barrels, tons, etc., and are paid to you by a person or company who leases the property from you.

Depletion. If you are the owner of an economic interest in mineral deposits or oil and gas wells, you can recover your investment through the depletion allowance. For information on this subject, see chapter 9 of Publication 535.

Coal and iron ore. Under certain circumstances, you can treat amounts you receive from the disposal of coal and iron ore as payments from the sale of a capital asset, rather than as royalty income. For information about gain or loss from the sale of coal and iron ore, see Publication 544, chapter 2.

Sale of property interest. If you sell your complete interest in oil, gas, or mineral rights, the amount you receive is considered payment for the sale of section 1231 property, not royalty income. Under certain circumstances, the sale is subject to capital gain or loss treatment on Schedule D (Form 1040). For more information on selling section 1231 property, see chapter 3 of Publication 544. 

If you retain a royalty, an overriding royalty, or a net profit interest in a mineral property for the life of the property, you have made a lease or a sublease, and any cash you receive for the assignment of other interests in the property is ordinary income subject to a depletion allowance.

Part of future production sold. If you own mineral property but sell part of the future production, in most cases you treat the money you receive from the buyer at the time of the sale as a loan from the buyer. Do not include it in your income or take depletion based on it. 

When production begins, you include all the proceeds in your income, deduct all the production expenses, and deduct depletion from that amount to arrive at your taxable income from the property.

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