Required Information About Tax For Selling Mineral Rights

Dealing in mineral rights is a very well-known business option for citizens of the United States. They are eligible to use purchase, trade, or sell them. When you have mineral rights, mining and excavation of that mineral is completed by a hired contractor or professionals under the owners’ supervision. Another option they have is handing over the mineral right on a lease. In this case, they will receive recurring royalties from an individual or company that has taken on the responsibilities of the lease for a certain tenure. If the owner does decide to sell, they will no longer receive royalties. They will however receive a lump sum payment for the property. 

The major concern people may have stems from the tax penalties they may face when selling their mineral rights. Knowledge of the 1031 exchange capital gains is important to know in this situation. The tax differs depending on your location and the rules the state has for mineral rights. With this information it is entirely possible for you to start a new business or get a new home and live a prosperous life by selling your mineral rights.

Some more information…

To start, take a look at the taxes you can incur from the sale of mineral rights. There are four types of taxes you may come across from the sale. This includes federal income tax, long-term capital gain tax, state tax and royalties. Each of these taxes vary from place to place. Federal income tax in the U.S. varies from 10 to 39.6 percent, based on the income amount. The amount paid for each of the other taxes mentioned are about the same.

In order to defer the tax, you can opt for the 1031 exchange capital gains option. With this you can invest the money you have earned into another property that is equivalent to the one sold. The price can be greater than your sold property, but not less. If the amount is less, the difference will be considered taxable. The property value and type of property should be the same. It would not be considered a 1031 exchange property if for example you were to sell a house and purchase mineral rights as these are different types of property.

There are several other rules and regulations to qualify for the 1031 exchange capital gains and professional help is needed to ensure you follow all of them. You can call the experts from Ten31 Minerals to get the maximum tax benefit from selling your mineral rights and keep the money rolling successfully.