Mineral owners with oil rights, gas rights, and mineral rights may have second thoughts about putting these rights up for sale. After all, it is possible that individuals on an extremely successful or productive well could make more money in royalty income by retaining these rights. Unfortunately, however, situations like this are hardly the majority. In far too many instances, mineral owners retain their mineral rights and never receive the economic payout that they’re hoping for. Many landowners sell their mineral rights for several reasons, but finding the right reasons for you is most important.

Guaranteed Money and Less Financial Risk
By selling mineral rights now, however, you are guaranteed a lump sum payment for your rights, and you’ll know and agree to the price in advance with a few mineral buyers, removing the financial uncertainty that comes with retaining these rights. Even if your well turns out to not be productive and doesn’t provide royalty payments, that financial burden will be passed on to the buyer, and you are still guaranteed the full amount of the market value when you sell for an agreed amount.

Why Sell Mineral Rights Now
In addition to the guaranteed payout that selling mineral rights can provide, for mineral owners, there is also considerable benefit in selling mineral rights rather than leasing for royalties. While mineral royalties are taxed as ordinary income, with tax rates of up to 40%, the income you receive from selling mineral rights could be classified as capital gains. Depending on your income level, capital gains can be taxed at a lower rate than mineral royalties. You can see the benefits of capital gains rules if you sell inherited mineral rights, as well: inherited mineral rights that are sold are taxed based on their value at the point of inheritance rather than the point at which the rights are sold. This is known as taxing on a stepped-up basis. Since the value of mineral rights tends to go up with time, that means you can save money if you sell inherited mineral rights.

Timing Is Key
Another great incentive to sell mineral rights now is that the timing has never been better. The United States is currently experiencing an energy and natural gas boom, meaning that buyers are willing to pay top dollar per royalty acre to capitalize on this ever-increasing market. However, as history has shown, energy booms do not last forever, and so striking while the proverbial iron is hot is a must for anyone who is looking to truly capitalize on the potential financial value of their oil, mineral, and gas rights.

Many mineral owners are hesitant to sell mineral rights because they view it as a strategic long-term investment, hoping that by allowing production to take place on their land, they’ll make more money in the long run as opposed to selling these rights upfront for a known price. While, yes, there are some people for whom this strategy works, the truth is that far too many people hold out for this dream only to find out that their wells are not productive or that it takes far too long for development to start on their land for it to be economically beneficial.

Selling Mineral Rights can have Positive Tax Benefits
If you sell mineral rights to an eager buyer, however, you can significantly reduce your financial risk in the long run, all while still securing a significant financial payout. Additionally, individuals who sell their mineral rights stand to receive notable tax benefits. For many mineral owners, selling gas, oil, and mineral rights can qualify as a long-term capital gains tax, whereas people who lease these rights to developers are conversely saddled with higher tax penalties, as money secured by leasing their land is treated as regular income. Nevertheless, there are ways to turn your mineral rights into a promising investment opportunity. You can also see tax benefits if you sell inherited mineral rights, as these rights are taxed based on their value at the point of inheritance, rather than at the point of sale, known as stepped-up taxation.