Taxation

Managing Income Tax Payments from Oil and Gas Income

Oil and gas income is subject to state and federal taxation, and landowners who receive income from oil and gas lease bonus payments and royalty payments must understand their tax obligations. There are a number of strategies a landowner can employ to manage income tax liability.

Shale Oil and Gas Payments and the Ohio Commercial Activity Tax

The state of Ohio implemented the Commercial Activity Tax (CAT) under House Bill 66 in 2005. Landowners are subject to the CAT if any royalty or lease payments, or any combination of the two, surpasses $150,000 annually.  

Depletion Deductions

Landowners who have active oil and gas extraction on their property may be able to reduce their income tax liability for their royalty payments by using what the Internal Revenue Service (IRS) refers to as the “depletion deduction.” 


OSU Extension Shale Fact Sheet Series

                              

Income Tax Management of Oil and Gas                            Shale Oil and Gas Payments Are Subject
           Lease Payments                                                            to Ohio Commerical Activity Tax

  Using the Depletion Deduction to
   Minimize Oil and Gas Tax Liability