Oil and gas tax CPAs for Louisiana mineral owners and operators
We are oil and gas tax specialists. Mineral and royalty owners, heirs and trusts holding minerals, and working interest owners and operators: each files under different rules, and we prepare those returns for clients across Louisiana from one office in Metairie.
Who we work with
Two tracks, owners and operators, with heirs and trusts in between. Leases, title and servitudes are legal questions; we work alongside your attorney or landman.
Mineral and royalty owners
Royalties go on Schedule E, gross, with the taxes the operator withheld deducted separately. Royalty income carries no self-employment tax, and depletion is the deduction that matters most.
Heirs, trusts and estates
Inherited minerals take a basis equal to their value at the date of death. That basis drives cost depletion and the gain on a later sale, so it needs to be set once and kept on file.
Working interest owners and operators
A working interest is a business: it goes on Schedule C, and a profit of $400 or more carries self-employment tax. Held directly, its losses are not passive, and drilling costs can be deducted in the year paid.
What we do for mineral and royalty owners
The tax work behind a royalty check.
- Royalty and lease bonus reporting Every operator statement onto Schedule E, with bonus and delay rentals reported as the income they are.
- Cost versus percentage depletion We figure both for each property and claim the larger, inside the limits the law sets.
- Check stub and 1099 reconciliation Gross royalties, severance tax withheld and the 1099-MISC tied together before the return is filed.
- Estimated tax payments Quarterly payments sized to a big royalty year, so the bill is not a surprise in April.
- Multi-state and nonresident returns Louisiana nonresident returns for owners who live elsewhere, and other-state credits for Louisiana residents.
- Inherited minerals, trusts and estates Basis at the date of death, depletion from that basis, and royalty income on estate and trust returns.
- Sale of mineral rights The gain figured from your basis, and the difference between selling outright and keeping a royalty.
What we do for working interest owners and operators
The returns and elections that come with drilling.
- Intangible drilling cost elections Deduct in the year paid or over 60 months, with the alternative minimum tax effect checked first.
- Depletion for producers Percentage depletion within the production and income limits, with disallowed amounts carried forward.
- Lease and well equipment depreciation Pipe, casing, tanks and engines depreciated, with bonus depreciation where the property qualifies.
- The passive loss exception How the interest is held decides whether its losses offset other income. We review it before you drill.
- Partnership returns and K-1s Form 1065 for the venture and a K-1 for each owner, matched to what each partner reports.
- Severance and property tax filings Louisiana severance tax returns and the LAT 12 oil and gas property report to the parish assessor.
- Bookkeeping & Payroll Monthly books and payroll through our bookkeeping service.
Federal rules that change the numbers
Published rules, each with its source.
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Independent producers and royalty owners may take percentage depletion at 15 percent of gross income from the property, on average daily production up to 1,000 barrels of oil or the natural gas equivalent. 26 U.S.C. 613A, as of November 2026.
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Percentage depletion cannot exceed the taxable income from the property, or 65 percent of your taxable income overall; the amount the 65 percent limit disallows carries to the next year. 26 U.S.C. 613 and 613A, as of November 2026.
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Depletion is never less than cost depletion, which is figured from your adjusted basis in the property; you take whichever method gives the larger deduction. 26 U.S.C. 612 and 613, as of November 2026.
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A lease bonus is left out of the income that percentage depletion is figured on. The lessor takes cost depletion on the bonus instead, and gives it back as income if the lease ends without production. Treasury Regulation 1.612-3, as of November 2026.
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Royalties from oil, gas or mineral property go on Schedule E, line 4, in the gross amount even when state taxes were withheld; the withheld taxes go on line 16. Estates and trusts use Schedule E too. IRS instructions for Schedule E, as of November 2026.
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Schedule E royalty income is not subject to self-employment tax. A working interest is reported on Schedule C, and net earnings of $400 or more from self-employment carry that tax. IRS instructions for Schedule C, as of November 2026.
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A working interest held directly, or through an entity that does not limit your liability, is not a passive activity even if you do not materially participate. Royalties outside a trade or business are portfolio income. IRS Publication 925, as of November 2026.
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Operators may elect to deduct intangible drilling and development costs in the year paid, or deduct them over 60 months instead. 26 U.S.C. 263(c) and 59(e), as of November 2026.
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For a producer that is not an integrated oil company, intangible drilling costs are not an alternative minimum tax preference, but that relief cannot reduce alternative minimum taxable income by more than 40 percent. 26 U.S.C. 57, as of November 2026.
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Tangible well items such as pipe, casing, tubing and tanks are depreciated; eligible property acquired after January 19, 2025, qualifies for the permanent 100 percent bonus depreciation deduction. IRS newsroom, IR-2026-06, as of November 2026.
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The qualified business income deduction of up to 20 percent is now permanent. It applies to income from a trade or business, so a working interest qualifies more readily than royalties held as an investment. IRS, qualified business income deduction, as of November 2026.
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Selling your complete interest in oil, gas or mineral rights is a sale of section 1231 property, not royalty income. Keeping a royalty and assigning the rest is a lease, and the cash is ordinary income subject to depletion. IRS Publication 525, as of November 2026.
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Estimated tax is generally due when you expect to owe $1,000 or more; paying 90 percent of this year’s tax, or 100 percent of last year’s (110 percent above $150,000 of adjusted gross income), avoids the penalty. IRS estimated tax FAQ, as of November 2026.
Problems we fix
What we see most on returns that come to us from elsewhere.
Depletion never taken
Royalty returns filed with no depletion, or with cost depletion when percentage depletion was larger. We figure what was missed and amend.
Royalties on the wrong schedule
Royalties reported on Schedule C can draw self-employment tax they do not owe. A working interest reported as royalties belongs on Schedule C.
No estimated payments in a big year
A new well or a lease bonus can leave you owing far more than $1,000 with nothing paid in. We set quarterly payments to the safe harbor.
Prior-year returns to amend
A refund claim on Form 1040-X is generally open for 3 years after you filed or 2 years after you paid, whichever is later.
An IRS or Louisiana notice about royalties
Often the 1099-MISC shows gross royalties and the return reported the net check. We answer the notice and show where the severance tax went.
Inherited minerals with no basis on file
Without a date-of-death value, cost depletion and the gain on a sale start from the wrong number. We document the basis and use it.
What is different in Louisiana
Severance, income and property tax rules, each with its source.
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Oil severance tax is 12.5 percent of value for wells completed before July 1, 2025, and 6.5 percent for wells completed on or after that date; incapable wells pay 6.25 percent and stripper wells 3.125 percent. Louisiana Department of Revenue, as of November 2026.
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Natural gas severance tax is a rate per thousand cubic feet, reset each July 1: $0.1514 from July 1, 2026, through June 30, 2027, up from $0.1052 the year before. Louisiana Department of Revenue, as of November 2026.
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Severance tax is owed by the owners in proportion to their interests; the operator or purchaser withholds each owner’s share before paying royalties. La. R.S. 47:635 and 47:636, as of November 2026.
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Louisiana individual income tax is a flat 3 percent and corporate income tax a flat 5.5 percent, both from January 1, 2025. Louisiana Department of Revenue, 2024 tax reform summaries, as of November 2026.
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A nonresident with Louisiana income who must file a federal return files Form IT-540B; royalties from Louisiana sources are taxable to Louisiana. Louisiana Department of Revenue, IT-540B instructions, as of November 2026.
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Louisiana residents claim the credit for income taxes paid to other states on worksheet R-10606, attached to Form IT-540. Louisiana Department of Revenue, R-10606, as of November 2026.
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Wells and well equipment, including leased equipment at the well site, are reported to the parish assessor on form LAT 12 by April 1, or within 45 days after you receive it, whichever is later. LAT 12, oil and gas property report, as of November 2026.
How we work with you
From the first conversation to year-round support.
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Discovery
We learn your business, your goals and your full financial picture.
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Planning
A year-round tax strategy built around your situation, not a template.
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Execution
Returns, bookkeeping and compliance, handled on time.
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Advisory
We adjust the plan as your life, your business and the law change.
Questions people ask
How are oil and gas royalties taxed?
Royalties are reported on Schedule E, in the gross amount even when severance tax was withheld; the withheld tax is deducted on its own line. Royalty income on Schedule E is not subject to self-employment tax, and depletion reduces the taxable amount.
What is the depletion deduction for royalty owners?
Depletion lets the owner of an economic interest recover the investment as the oil and gas is produced. Royalty owners may use percentage depletion at 15 percent of gross income from the property, limited to the income from that property and to 65 percent of total taxable income, or cost depletion from their basis. The law allows whichever is larger.
How is a lease bonus taxed?
A lease bonus is income in the year you receive it. Percentage depletion does not apply to a bonus, but cost depletion can, and that depletion is added back to income if the lease ends without production. A delay rental is ordinary income with no depletion.
Do I pay self-employment tax on a working interest?
A working interest is reported on Schedule C, and net earnings of $400 or more carry self-employment tax. Separately, a working interest held directly or through an entity that does not limit your liability is not passive, so its losses can offset other income.
What happens to taxes when I inherit mineral rights?
The minerals take a basis equal to their fair market value at the date of death. That basis is what cost depletion is figured from and what a later sale is measured against, so the value should be documented when you inherit.
How are taxes figured when I sell mineral rights?
Selling your complete interest is a sale of section 1231 property, so the gain over your basis can be taxed as a capital gain. If you keep a royalty and assign the rest, the IRS treats it as a lease and the cash as ordinary income subject to depletion.
Do I file in Louisiana if I own minerals here but live in another state?
Yes, if you must file a federal return. Royalties from Louisiana property are Louisiana-source income, reported on the nonresident return, Form IT-540B, at the flat 3 percent rate.
Why does my 1099-MISC not match my royalty checks?
Payers report royalties on Form 1099-MISC before reduction for severance and other taxes withheld, while the check is net of them. Report the gross on Schedule E and deduct the withheld taxes, and the return will match the 1099.
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