Do I have to pay local earned income tax on a gas lease?

by Timothy J. Gooch, CPA | May 16, 2018
askacpaiconI received a 1099 MISC form marked RENT for signing a gas lease (a bonus). Do I have to pay local earned income tax on this money? My township just instituted this tax last year, and I am not familiar with it. I have gotten contradictory answers on this. 

Answer: Although many companies report lease bonus payments as “rent,” such bonus payments are technically advance royalties. They are still taxed as ordinary income, same as rental income, but it is not passive income that can be used to offset passive loss carryovers. It is also NOT earned income, so it is not subject to local earned income tax.

Answer By: Timothy J. Gooch, CPA, is a partner with ParenteBeard LLC in Wellsboro, Pa.

***Answer originally published June 1, 2013.
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