Taxes on Suspended Royalty

Good afternoon,

My brother and I both just received a decent amount on suspended royalty in Montague County in Texas. I am trying to ball park how much to hold back for tax purposes. 15%, 28% ? 50%?

Thank you!

I think 30% would be a good number to go by, depends on your State, et al.

R.E. I am no expert, but also do not forget about self employment tax if your present job takes care of withholding out of your salary. I know some accountants say that royalties are passive income and not subject to SE tax. I am not here to start an argument. Congratulations, Kathy

Don't forget that you will also owe taxes to the County. Producing properties in Texas are taxed for the roads, schools, hospitals, etc.

Royalty income is reported on Schedule E and that is where you deduct any related expenses. It is not subject to self-employment tax as it is not classified as earned income. There is a rare exception if you declare yourself to be in the business of royalty. Working interest income is reported on Schedule C and is subject to self-employment tax. Your taxes will depend on your marginal tax rate of adding the royalties on top of your other income.

thanks everyone..I decided to put 51% into a 182 day CD then roll that into a 90 day CD which will mature about tax time next year and return a little bit. That should give me more than enough for taxes.

Tennis, you are correct. I am a CPA and couldn't have said it better.