Can you deduct the severance tax on income tax? Also, what about the other charges that are passed on to us.
This can't be that hard?
Dana, I can tell you what I deduct. The severance taxes on Schedule E to the form 1040 under Taxes or Other. I deduct all the taxes paid to the city, school, etc. on Line 16 and show Severance Tax on Line 18 Other and list it as severance tax. You can also deduct a 15% depletion allowance on Line 20 (15% of the amount of royalties received on Line 4). If you have to consult with an attorney regarding your royalty payments, etc. these are deductible. See Schedule E and you may see another related expense that may be deductible.
What other charges are shown on your check stub?
Under county there are sev/prod tax and under state there is net value , then a portion of that is “other withholding”. Can I deduct both county and state? Thanks for any help!!!
Simple Example: you receive $200,000 in royalties.
Your tax statement showed your earnings were $250,000.
$50,000 was withheld for severance tax.
You have to claim $250,000 as gross earnings, deduction claim for severance tax is $50,000
add the 15% depreciation.