I know that real estate taxes can be deducted on schedule E for properties that produce royalties or that are leased. I have just leased a property for 3 years. When I do my taxes, I will deduct the real estate taxes on the schedule E for the lease payment. Is there any way to deduct the taxes on the next 2 years of the lease, even though I will not receive another 1099?
Check with your accountant. Lease Bonus is generally considered ordinary income to individuals and real estate taxes are a deduct from ordinary income in the year the taxes are incurred. If you have your OK and TX minerals set up in a corporation, partnership, or Trust, different rules apply. If you are fortunate enough to earn royalty under the lease, deductions for depletions (at least 2 types) are allowed against the passive royalty income. NY accountantss may not be familiar with this now but with the Utica Shale development, they will be soon.
I got rid of my accountant and started doing my own taxes a number of years ago because I knew more than he did about how to handle my royalty income (and I work a lot cheaper!) Here is the situation: There is no corporation etc., I will report the lease as ordinary income, and will deduct the real estate tax on Schedule E this year. The following 2 years, I will obviously still pay the taxes, but all of the lease bonus will have been paid this year. Therefore I will not get a 1099 form and generate a schedule E on which to claim deductions. I may need to find an accountant in OK or TX to consult, but I thought maybe other people had the same situation.