Line 16 of Schedule 1040 E

I have worked with several CPA’s that have not been able to assist me properly with Gas and Royalty income tax. Does anyone know if we can deduct severance taxes on line 16 of the 1040 Schedule E ?

Gross royalties (before severance taxes and cost deductions) is reported at top of Schedule E so that you get the full depletion. Severance taxes are properly reported as deduction on Schedule E, as well as other charges on the check. Be sure to separate out any state income taxes withheld as those are not deductible on Schedule E. You need to find a CPA who is familiar with oil and gas.

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