Mineral Rights Taxes
Mineral rights refer to the ownership of the minerals that lie beneath the surface of a piece of land. These rights can be bought and sold, just like any other form of real estate. If you are thinking of selling your mineral rights, it’s important to understand how they will be taxed.
Sale of Mineral Rights Tax Treatment
The sale of mineral rights is taxed at capital gains tax rates. This means that the tax you pay will depend on your tax bracket and how long you have owned the mineral rights. If you have owned the rights for more than a year, they will be taxed at the long-term capital gains rate, which is generally lower than the ordinary income tax rate. If you have owned the rights for less than a year, they will be taxed at the short-term capital gains rate, which is the same as your ordinary income tax rate.
Tax on Sale of Inherited Mineral Rights
If you have inherited mineral rights, the tax liability can be further reduced through a process known as “step-up basis.” This means that the value of the mineral rights is reset to their current market value at the time of inheritance, rather than being based on the original purchase price. This can significantly reduce the amount of capital gains tax you will owe when you sell the rights.
Will I get a 1099?
It’s important to note that you will not receive a 1099 form for the sale of mineral rights. This is because the sale of mineral rights is not considered taxable income. However, you will still need to report the sale on your tax return and pay any applicable capital gains tax.
Offer from Fraction Royalty
If you are considering selling your mineral rights, it’s a good idea to get an offer from Fraction Royalty. This company specializes in buying mineral rights and can provide you with a fair and competitive offer. By working with Fraction Royalty, you can ensure that you are getting the best price for your mineral rights and minimizing your tax liability.
Same Day Quote
After we receive your last 3 months of royalty statements, our team will put together a formal offer for you to consider. Your formal offer will be ready within 24 hours, and typically the same day you provide your documentation.