I live in the State of Utah, and pay Federal and State taxes on total monies earned. NOW HERE IS MY PROBLEM, I own Oil & Gas land and Royalty interest in Doddridge County WV. I get 1099 from all Royalty received and add it to total income that I pay in Utah. Each year I receive property taxes from Doddridge County that I pay,( Doesn't amount to much now, around $1000.00 for the year), however now that Marcellus wells are producing, I expect my WV taxes to increase. How can I deduct the property taxes from WV. since I live in Utah, Is there a special form to do this. To make matters worst, My tax guy whom I have been using for thirty years lives and works in Calif. and knows nothing about WV taxes or laws.
Arnold Stuart
My humble understanding is that you only play WV property tax on the income generated during that year. There is a mysterious formula which converts the income into taxes owed, as explained to me from the wv tax dept.
Thanks Brannon: Another question, since I am declaring all income from Gas & oil royalties that I get from WV 1099 in Utah, do I pay West Virginia State Taxes as well, I never did in the past because the amount has been small. Thanks again for the fast response.
I don't know. You would probably have to call or google WV state tax dept. My own CPA in WV has problems with royalties. Don't forget about depreciation allowance for deductions.
The way I understand it, you put your royalty income on a schedule E (separate one for each property that generates royalty), deduct the property tax for it on the line for taxes, any other expenses, depreciation, and the net for that property is added with any other to your income total. I think any nonproducing properties for which you pay taxes can have the taxes deducted as expenses for your oil and gas business, along with things like lawyer's fee for getting advice about a lease, postage for mailing your taxes, expenses for getting copies of deeds, dues for Royalty owners' associations (such as NARO) etc.
The West Virginia property taxes are based on the assessment which is related to any revenue from the property (royalty) which is reported to the state tax dept. by the producer, then reported to the county by the state tax dept. This determines the property tax (assessed value times the local tax rate).
West Virginia state income tax is a different situation. Depending on your total income and your income from West Virginia sources, you may or may not need to pay WV state taxes (don't know particulars but I'm sure this is easy to find). For my state (NC) since the NC state tax rate is higher than WV state tax rate, NC gives me "credit" for paying WV taxes but gets its share of my WV earned revenue by subtracting the WV tax rate from NC rate and charging me that % on my WV earnings.
Turbotax can calculate this.
Back to the likely increase in property tax due to increased revenue due to increased production, this is true but will be delayed a couple of years because of how they do things in the state tax office and the local tax office. You should get a revaluation notice for any property that is being reassessed upwards.
I am not an accountant nor an attorney so check this out, but this is my understanding.
Hey Nancy: That breakdown of my tax situation is one of the best explained by anyone so far, including my tax guy. I have always lumped my earnings from royalty with my total income and paid my Federal and state (Utah) taxes yearly, never paid WV State taxes, however, in 2012, I have received bonus money from leasing that brings my income way up, do you know if bonus money is taxable by WV State taxes?. The way I understand it, only what comes out of the ground (Royalty) is taxed by WV. It's complicated. I will take your advice and contact WV Tax dept.
Thank you so much for your help
Arnold Stuart
Arnold, you're welcome!
the way I understand it, any income earned in West Virginia, even if you fly there every day to go to work from Utah (haha) would be considered West Virginia income, and subject to West Virginia income tax if your total taxable income from all sources is high enough. So you prepare your federal income tax, get the taxable income, then start figuring the West Virginia income. Bonus money is considered like rental income, I think. The royalty income can have the depletion deducted, as well as the property tax and any other expenses. However, even though all of your income is calculated to see if you have to pay any West Virginia state income tax, the tax itself is only based on the portion of your income earned in West Virginia.
The property tax, while calculated based on information from the WV Tax office for property earning royalty income, is taxed by the county.
I am probably saying all this several times, but it really is complicated, and I have had several years now to get it straight in my mind. And TurboTax is my friend!
Thanks again Nancy:
I have sent all my earnings (WV) included to my CPA, tried to get info out of WV State TAX, to no avail, have been on a waiting list since Monday,( finally gave up). Talked to a CPA in West Union WV, and he told me pretty much the same as you, and that is the guide line that I will follow. Thanks again for your response. The good thing about April is SPRING.