Since I pay a portion of the post production costs which are deducted from my royalties, which include some taxes (that are not federal or state), anyone know if they are deductible?
Ms. Nolen, I don't believe that you can deduct post production costs. As a lessor you don't own the oil and gas, you just receive a royalty% of what it sells for, after the deduction of the costs. The same goes for flared gas, since you leased it, you don't own it and can't deduct it as a loss. I'd be interested if someone had better and conflicting information than what I posted above.
Here is a discussion about deducting severance taxes from 2011: http://www.mineralrightsforum.com/forum/topics/severance-tax-deductions?commentId=4401368%3AComment%3A34038
Here are a couple general links about what you can deduct: http://www.groco.com/readingroom/oil_gasdepletion.aspx
http://www.rkingco.com/mineral-owners/oil-and-gas-royalty-income-taxes/
Hope this helps,
Bill
Don't forget to look into the "depletion deduction," which allows you to deduct a percentage of the amount of your royalty income from your federal income taxes (if you itemize). Currently, the percentage is 15%, I believe. Check out Schedule E, Line 18.