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Royalties - General Information
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To enter royalty income in the TaxAct program:

If you have not already entered the applicable Schedule E information:

  1. From within your TaxAct return (Online or Desktop), click Federal. On smaller devices, click the menu icon in the upper left-hand corner, then select Federal.
  2. Click Rent or Royalty Income in the Federal Quick Q&A Topics menu to expand the category and then click Royalties
  3. Click +Add Federal Schedule E to create a new copy of the form or Review to review a form already created
  4. Continue with the interview process to enter all of your applicable royalty information, including selecting 6 - Royalties as the Property type
  5. Click Yes to indicate that you received a Form 1099-MISC
  6. Click +Add Form 1099-MISC to create a new Form 1099-MISC
  7. Click Form 1099-MISC Quick Entry to open the Quick Entry window
  8. Enter all of the applicable information from your Form 1099-MISC
  9. Close the Quick Entry window
  10. Assign the Form 1099-MISC that you just entered to the Schedule E that you are currently completing from the Assigned form or schedule drop-down list

If you have already entered the applicable Schedule E information:

  1. From within your TaxAct return (Online or Desktop), click Federal. On smaller devices, click the menu icon in the upper left-hand corner, then select Federal.
  2. Click Form 1099-MISC
  3. Click +Add Form 1099-MISC to create a new Form 1099-MISC in the Federal Quick Q&A Topics menu
  4. Click Form 1099-MISC Quick Entry to open the Quick Entry window
  5. Enter all of the applicable information from your Form 1099-MISC
  6. Close the Quick Entry window
  7. Assign the Form 1099-MISC that you just entered to the applicable Schedule E from the Assigned form or schedule drop-down list.
  8. Click Continue

Additional Information

Per IRS Publication 525 Taxable and Nontaxable Income, page 17:

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 or 1040-SR). 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 (Form 1040 or 1040-SR).

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 are generally 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 generally based on production or revenue and are paid to you by a person or company who leases the property from you. 

Depletion. If you're 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 Pub. 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 chapter 2 of Pub. 544. 

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 as explained in the Instructions for Schedule D (Form 1040 or 1040-SR). For more information on selling section 1231 property, see chapter 3 of Pub. 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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