Mineral Rights Taxes: Do You Have to Pay Property Tax?
Understanding mineral rights is easy. Understanding the taxes associated with mineral rights is a bit more complicated. The short answer is Yes. If you own producing mineral rights, then you must pay property taxes on them. This is because, like surface rights, owning mineral rights means that you own real property, even if it is just a fraction of an estate.
You cannot go and “visit” your mineral rights property? Since it is below the surface of the Earth, it still exists, and therefore is taxed as property. If you only own a fraction of the estate, which is very common, then you will only have to pay a fraction of the property tax as well. The amount of taxes is based on the volume or the value of the minerals produced.
It is very important to note that in most states, this property mineral rights tax is only enforced when the property is in production. When in production, the tax is only billed and collected once per year. If you own non-producing mineral rights, such as the land below your suburban residence, there is a good chance that your annual property tax will not include an amount associated with your mineral rights.
Can I be exempt from taxes on my Mineral Interests?
Yes. Standard property tax code exempts mineral rights owners from paying taxes on very small amounts. The current threshold allows mineral interests valued below $500 to be exempt from taxation.
How do multiple property taxes work with an oil or gas lease?
If you own an oil or gas lease, chances are there may be multiple wells on the property. Each well is considered to be a different piece of property and you will, therefore, have separate mineral rights taxes for each one.
If you have further questions related to the topic, feel free to reach out to us here.
Is mineral property tax an eligible deduction on Federal Tax returns? If so where is it reported? I am using schedule E and the only tax line (16) is for the taxes taken out by the payers of the royalties. Should it be included here or does it go elsewhere. (I am not itemizing deductions this year)
Curious if you ever got an answer for this question? I was wondering the same thing.
Hi Edward and Sara, Yes, I report the property tax on mineral rights on schedule E even if there’s no income or royalty, you can still deduct what you pay in property tax.
In texas, do veteran with 100% p&t that is exempt from all property tax have to pay taxes on mineral rights? or is mineral rights fall under ALL PROPERTY TAX?
What recourse does the state have if I fail to pay the taxes on mineral rights income? There isn’t actual real property to seize, so how do they enforce compliance?
Our family owns coal mineral rights in Ohio. Has anybody successfully reduced the property tax on coal to zero due to the diminishing economic value?
Given the mineral estate (under O&G lease), in addition to owning real property rights to the minerals in place, also owns the dominant interest in the industrial use of the surface estate / real property interest, how are these dominant real property interests in the surface estate assessed? The industrial value / dominant use interest of the surface estate is far greater than the shared servient uses.