360° Coverage : Taxes From A To Z (2014): R Is For Royalties

1 Updates
Taxes From A To Z (2014): R Is For Royalties
Photo Credit: Forbes Business

Taxes From A To Z (2014): R Is For Royalties

Apr 2 2014, 2:33am CDT | by

R is for Royalties. Royalties are funny things. Generally, we associate royalties with music – and sometimes books. But royalties are bigger than books and music: they are payments for the use of...

Filed under: news

 
 
 

29 weeks ago

Taxes From A To Z (2014): R Is For Royalties

Apr 2 2014, 2:33am CDT | by

R is for Royalties.

Royalties are funny things. Generally, we associate royalties with music – and sometimes books. But royalties are bigger than books and music: they are payments for the use of your property. That could be the use of your intellectual property but it could also be the use of your real property. The source of royalty income can run the gamut from copyrights to patents to oil, gas and mineral properties.

From a tax standpoint, royalties are generally reported to you on a form 1099-MISC at box 2 and are taxable as ordinary income. Interestingly, however, there’s no one size Schedule fits all for royalties. The kind of property determines where you report the royalties – even though the tax rate is the same.

If you hold an operating oil, gas, or mineral interest, you report those on a Schedule C or Schedule C-EZ. Similarly, if you receive royalties from your efforts as a self-employed writer, inventor or artist, you report those on a Schedule C or Schedule C-EZ. Royalty income reported on a Schedule C or Schedule C-EZ is subject to self-employment income.

Royalties for everything else are reported on Schedule E. Schedule E income is not subject to self-employment income.

Of course, natural resources don’t last forever. In order to account for what happens as you use up resources, you can take a depletion deduction at Part I of Schedule E. You can think of depletion like depreciation: it allows you to recover costs related to capital you initially contributed. And like depreciation, you have to recapture depletion at the sale of the property.

If you sell your royalty interest, it likely ceases to be treated as royalty income and may be treated as capital gains. Be careful, however, since that will vary depending on the circumstances including the specific asset.

Figuring out royalty income can be tricky. If you receive royalty income (especially royalty income subject to depletion) be sure to consult with a tax professional.

For more in the series, see:

Want more taxgirl goodness? Pick your poison: receive posts by email, follow me on twitter (@taxgirl), hang out with me on Facebook or check out my YouTube channel. If you want to keep an eye on documents I’ve posted, check out my profile on Scribd. And finally, you can subscribe to my podcast on the site or via iTunes (it’s free).

Source: Forbes Business

 
Update
1

8 weeks ago

Khazanah throws MAS RM6b lifeline

Aug 29 2014 5:01pm CDT | Source: Business Times Singapore

August 30, 2014 1:15 AMKHAZANAH Nasional will inject RM6 billion (SS$2.4 billion) over three years to resuscitate loss-making Malaysia Airlines (MAS) under a recovery plan that includes even an Act of Parliament. Other key moves are migrating its operations, assets and liabilities to a new company (New ...
Source: Business Times Singapore   Full article at: Business Times Singapore
 

 

Don't miss ...

 

<a href="/latest_stories/all/all/30" rel="author">Forbes</a>
Forbes is among the most trusted resources for the world's business and investment leaders, providing them the uncompromising commentary, concise analysis, relevant tools and real-time reporting they need to succeed at work, profit from investing and have fun with the rewards of winning.

 

blog comments powered by Disqus

Latest stories

Snoring masks don't kill sex life: Study
New York, Oct 28 (IANS) A common therapy to tackle obstructive sleep apnea (OSA) does not become a hindrance between the sheets, says a study, allaying fears of OSA patients who believe the therapy interferes with sex.
 
 
Advanced hearing aids distort music more
New York, Oct 28 (IANS) The more advanced an hearing aid is today, the worse experience it would offer to music lovers who use such aids, says a study.
 
 
Hair disorder could signal dental decay
Washington, Oct 28 (IANS) If you are experiencing hair fall problems, your teeth may require extra care as researchers have found that hair disorder could increase risk of dental decay.
 
 
Three Red Cross workers cleared of Ebola in New Zealand
Wellington, Oct 28 (IANS) Three New Zealand Red Cross healthcare workers have been cleared of possible Ebola infection after being put on "self-monitoring" since returning from working in Ebola-affected countries in West Africa, Health Minister Jonathan Coleman said Tuesday.
 
 
 

Latest from the Network

MIT survey reveals sexual assault on campus
New York, Oct 28 (IANS) Nearly 17 percent of female and five percent of male undergraduate students at the Massachusetts Institute of Technology (MIT) have revealed that they were sexually assaulted on the campus, said...
Read more on Politics Balla
 
Flashlight apps stealing your data?
New York, Oct 28 (IANS) Do you use a flashlight app on your smartphone? Security experts warn that free flashlight apps are secretly recording sensitive information from your phone. According to a US-based security...
Read more on Politics Balla
 
People flee as lava reaches Hawaiian village
Honolulu, Oct 28 (IANS) Many residents of a Hawaiian village have fled their homes, threatended by the flow of lava from Kilauea Volcano, a media report said Tuesday. People at Pahoa are running away as the lava from...
Read more on Politics Balla
 
When Anne Hathaway freaked out
Los Angeles, Oct 28 (IANS) Anne Hathaway plays an astronaut in her forthcoming film "Interstellar" and the actress says wearing a spacesuit for the first time wasn't a great experience. "When I stepped on the set, I...
Read more on Celebrity Balla
 
Sienna Miller, Tom Sturridge played cupid for Pattinson
Los Angeles, Oct 28 (IANS) Sienna Miller and Tom Sturridge were instrumental in introducing actor Robert Pattinson to his current girlfriend - singer FKA Twigs. Pattinson, Miller and Sturridge all went to see Twigs in...
Read more on Celebrity Balla
 
Megan Fox misses premiere
Megan Fox was forced to miss the Beijing premiere of 'Teenage Mutant Ninja Turtles' after being stricken by an allergic reaction. The 28-year-old beauty - who plays April O'Neil in the new movie - had joined co-star...
Read more on Movie Balla
 
British doctor 'killed without legal justification' in Syria: Jury
London, Oct 28 (IANS) A doctor from south London was "killed without any legal justification" in a jail cell in Syria, an inquest jury has said. The jury at the Royal Courts of Justice said Monday, Abbas Khan, a 32...
Read more on Politics Balla
 
ICC forced to clamp down on chucking: Dave Richardson
Sydney, Oct 28 (IANS) International Cricket Council (ICC) chief executive Dave Richardson said Tuesday the game had reached the "straw that broke the camel's back" with suspect bowling actions, forcing the governing...
Read more on Sport Balla
 
Blue or yellow ribbon? Protests divide Hong Kong society
Hong Kong, Oct 28 (IANS/EFE) The yellow ribbons of pro-democracy protesters and the blue ribbons of their opponents symbolise the division in Hong Kong over the "umbrella revolution" which is about to complete a month...
Read more on Politics Balla
 
N-deal possible in a month: Iranian president
Tehran, Oct 28 (IANS) Iranian President Hassan Rouhani has said that a final nuclear deal between Tehran and the six world powers may be possible within a month. In a meeting with Norwegian Ambassador to Tehran...
Read more on Business Balla