Oil and gas royalties
Taxable
Is Oil and gas royalties Taxable?
Short answer: Yes: royalties are ordinary income on Schedule E, and you can take a 15% percentage depletion deduction.
Working interests are subject to self-employment tax; royalty interests aren't.
Records to keep: Keep receipts, statements (1098, 1098-T, 1099, W-2G), and a note of what each cost was for. Compare itemizing to the 2026 standard deduction before you claim.
BW-B23-01648
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Oil and gas royalties
Taxable
Individuals / Personal Taxes
Other Expenses
Personal Tax Deductions
Yes: royalties are ordinary income on Schedule E, and you can take a 15% percentage depletion deduction.
BizWriteOffs provides educational information only and is not tax, legal, or accounting advice. Deductibility depends on your specific facts and records. Consult a qualified tax professional.
Business justification
Yes: royalties are ordinary income on Schedule E, and you can take a 15% percentage depletion deduction. Working interests are subject to self-employment tax; royalty interests aren't.
Category
- Personal Tax Deductions
personal deduction
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losses
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