State tax on mineral and royalty income

Whether your state takes a cut of your royalty check is one of the first questions an owner asks, and one of the few in this niche with a clean, settled answer. This page records, for every state and the District of Columbia, whether royalty income is taxed at the state level and whether the state levies an oil and gas severance or production tax, alongside the federal onshore royalty rate that applies to leases on federal land.

Quick answer: Royalty income is generally taxed as ordinary income at the federal level, and most oil and gas states also tax it through a state income tax and a severance tax on production. A handful of states levy no personal income tax, so an owner there keeps more of each check. This page lists how each state treats mineral and royalty income.

• Royalty income is ordinary income for federal tax.
• Most producing states add a state income tax and a severance tax.
• A few states have no personal income tax on royalty income.
• A sale of the interest is generally taxed as a capital gain instead.

This is a reference, not advice. Royalty income is generally ordinary income for federal tax, reported to you on a 1099. Whether your state adds its own layer depends only on whether the state levies a broad personal income tax. Confirm your own position with a tax professional.

On oil and gas produced from federal land the royalty owner is the United States, and the rate is set by statute, not by your state. The statutory minimum was a flat 12.5 percent for roughly a century. The Inflation Reduction Act raised it to 16.67 percent in 2022. The One Big Beautiful Bill Act then returned it to 12.5 percent for leases issued on or after 4 July 2025, with a Bureau of Land Management rule effectuating the change effective 29 June 2026. Offshore the rate is 18.75 percent. This affects federal leases only. It does not change what a state charges on income from private, fee, or state minerals. As of June 2026. Source: the Mineral Leasing Act as amended, the Office of Natural Resources Revenue, and the Bureau of Land Management.

The first column is a residency question for the owner: a No means the state has no broad personal income tax, so a resident pays no state income tax on royalty income, and a Yes means it is taxed as ordinary income. The second column is about the minerals, whether the state levies a severance or production tax on oil and gas. The two are separate. A severance tax is paid by the producer on the value or volume extracted.

Thirty four states levy a tax or fee on oil and gas production. Thirty use a severance, production, or extraction tax on the value or volume pulled from the ground, shown as Yes above. The four exceptions raise money another way and are shown as No: Pennsylvania, the largest gas producer without a severance tax, charges a per well impact fee instead; California levies a production assessment and leaves the rest to county ad valorem; New York reaches oil and gas through a property tax on producing units; and New Hampshire taxes only refined products, not extraction. Every remaining state has no oil and gas severance or production tax. As of June 2026.

The no income tax group is drawn from the Tax Foundation 2026 State Tax Competitiveness Index and confirmed against each state revenue department. The nine states with no broad individual income tax are Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. New Hampshire joined the group when its interest and dividends tax was repealed effective 1 January 2025. Washington levies a capital gains tax that does not reach royalty income, which is ordinary income. The severance classification follows the National Conference of State Legislatures compilation of state oil and gas severance taxes, under the definition that Yes means the state levies a severance, production, or extraction tax on oil or gas; Pennsylvania uses a per well impact fee and California a production assessment rather than a severance tax. The federal figure is from the Mineral Leasing Act as amended and current Bureau of Land Management and Office of Natural Resources Revenue guidance. Ad valorem is described from state revenue and county assessment sources, including the Colorado Oil and Gas Association on the local ad valorem framework and the Oklahoma and North Dakota statutes that place a gross production tax in lieu of property tax. Every figure here is checked to a primary or authoritative source before it is published, and corrections are welcome at offers@americanmineralregistry.com.

This dataset is free to use and cite under a Creative Commons Attribution 4.0 license. Attribute to American Mineral Registry with a link to this page.

On ad valorem. Ad valorem is shown by mechanism rather than as a single column on purpose. It is assessed and collected county by county, and authoritative sources treat a clean state by state comparison as impractical, so a forced national table would imply a uniformity that does not exist. The income and severance columns are refreshed each edition against the sources above.