We would suggest contacting a CPA specializing in taxes to help you plan for the future and get the most out of your sale proceeds, but here are a few tax advantages to selling mineral rights that are worth discussing:
1. Tax Savings: Taking advantage of the long-term capital gains tax. As long as a mineral owner has owned their property for over a year, the sale of mineral rights is taxed as a long term capital gain. This differs from lease bonuses and royalty payments, which are taxed at an individual’s regular income tax rate.
2. Paying NO taxes at all: “1031 Like Kind Exchanges.” When a mineral owner sells mineral rights, the transaction is classified as a sale of real estate. Under IRS Code Section 1031, the proceeds from this sale can qualify to be used in what is called a “1031 like kind exchange.” In this scenario you could invest your profits from selling your mineral rights in another, “similar” piece of real estate (like another home or a vacation home).