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WV Real Estate Taxes on Minerals
Mineral interests in WV are taxed the same as your home. You will pay 60% of the appraised value of the minerals at the levy rate for your county. The value of these minerals is based on WV Code procedures and is the same for all counties in WV. They all use the same formula methodology.
Once gas is being produced, the appraised value for both the working interest and royalty interest will increase, sometimes substantially, because the assessment is then based upon the amount of income generated to the producer and the amount of royalties paid to the property owner. This income information is supplied to the West Virginia Tax Division by the operator of the well. The Tax Division, not the Assessor's Office, uses this income information to determine the appraisal value.
Important Things to Know about your WV Mineral Real Estate Taxes
Minerals are taxed at a minimum value until production begins.
Mineral Assessed Value is 60% of the Appraised Value of the property.
Do not confuse Mineral Appraisal Value with the same term used on your residence. It is not what you can ‘sell’ your mineral interest for or indicate how much income you will receive this year or in previous years.
WV appraisal values for minerals are based on the start date of drilling and production income. The calculation also involves yield capitalization, discount rate, use of decline rate factors for the well area, well expenses, and the producing formation.
This calculation is supposed to represent the future income of the well based on a 30-year life.
Each horizontal well is appraised separately.
Your appraisal value will change annually as your royalty income fluctuates.
Production income is the amount paid for gas and oil that was removed from the ground during the calendar year. The production calendar year is January through December.
The Form 1099 you receive is based on the royalty check dates from January through December. Typically, a producer cuts a check 60 days after the production month; for example, April production income is paid in June. So, you have to look at the production dates on your royalty statements to determine your gross production income for the calendar year, not the 1099 you receive.
Based on Gross Production – not your net royalty check. If your lease allows for deductions and the producer withholds amounts for post-production costs, your real estate taxes are based on the gross before deductions, not what you actually receive.
You can use the WV DEP website to search well production data by month. After searching and locating the well leg, you can view the monthly well production data that is submitted to the State of WV.
Taxes you pay on your mineral interests are deductible on your federal tax return in the year you make the payment for the taxes. For example, if you pay your 2020 mineral tax bill in 2021, then it is deductible on your 2021 tax return.
The shock of your first (and sometimes subsequent) mineral real estate tax bill can be overwhelming, but understanding the above facts and circumstances will help.
Plan, save, and budget for your future mineral real estate tax bill.
Make sure you are receiving a mineral real estate tax bill, and your billing address is updated with the County Assessor. You don’t want your minerals sold at auction unknowingly.
If you don’t like the process, contact your local legislator. Your local county assessor is only following WV state guidelines and are at the mercy of the state tax division. The county assessor should be able to walk you through the taxing calculation. You can view the rules of WV Ad Valorem taxes here.
OLD FORMULA PRE-JULY 2021: The appraisal formula for producing wells is somewhat complicated because it includes estimating annual production for 1st year wells, utilizing actual royalties for 2nd year wells, and calculating a 3-year average for older wells. The appraisal model then capitalizes that value to predict a future income stream and then discounts that future income to a present worth value. In our area, the appraised value of the royalty interest usually equals 2-5 times the amount of one year’s income. The assessed value would be 60% of that amount.
Everything is on a 2-year delay in Royalties. Therefore, your 2021 tax bill is based on 2019 production numbers.
CURRENT FORMULA JULY 2021 TO PRESENT.
WV Legislature passed House Bill (HB 2581) in April 2021, requiring the State Tax Commissioner to develop a revised methodology to value oil and natural gas properties and to be effective July 1, 2021. The State Tax Division submitted an emergency rule on how it planned to carry out HB 2581.
According to the emergency rule adopted, the value of oil and natural gas-producing property will be determined by “applying a yield capitalization model based on a weighted average cost of capital to the net receipts (once royalties and annual operating costs are subtracted from gross receipts) for working interest (which is the production companies) and yield capitalization model applied to gross royalty payments for royalty interest (which is the mineral owner).”
- The new rule also eliminates the use of a three-year weighting.
- This new methodology will affect 2022 tax bills.
The yield capitalization model is based on the Gross Receipts for each producing well. The gross receipts amount will be apportioned to the working interest and the royalty interest. The royalty interest gross receipts shall be discounted by applying a decline rate and a mid-year life Inwood factor reflecting the capitalization rate. This calculation determines the projected future income of the well and is the basis for your appraised value.
You can find the decline rate and capitalization rate information in the current WV natural resource property valuation variables report. You will need to know what the age of your well is and your gross royalties for the base year. The age of your well is the number of years between July 1st and the first month of production. For example, on a 2022 tax year bill, if your date of first production is December 2015, then the age of the well is seven (7) years.
Next, you need to know the base calendar year gross royalties for your well to properly calculate the appraised value. For 2026 assessments, the calendar year of 2024 gross royalties (always on a two-year look back) are used as the base year. If your lease allows for deductions, this will not be the amount of your check, but the amount before deductions. Calendar year production is not the amount reported on your IRS Form 1099 for the year, because payment dates are 30-90 days behind the production month. For example, SWN pays 60 days after the production month, June production is paid in August. Therefore, to determine the calendar year 2024 production for SWN, you would add up March 2024 (January production) through February 2025 (December production) gross royalty checks. If you receive multiple checks from producers on the same well, you need to add up each producer’s royalties for the calendar year. In Ohio County, many mineral interest owners get paid by SWN and Equinor from a well, so both royalty amounts will need to be added up for the year.
You can verify your calendar year well amounts with what is reported by the well producer to WV by calling your county assessor’s office and asking what amounts were reported under your name for each well. Your totals and the totals that are reported to WV and verified by your assessor’s office should be close if not exact. If not, you will need to contact your well producer to determine the differences.
Tentative Notice of Increase in Appraisal. WV Tax Division is required to notify you if your mineral appraised property value for the forthcoming tax year has increased by at least 10% and $1,000. These notices are normally mailed on December 1st.
Use our Mineral Appraisal Calculator to verify your well values for 2026.
This calculator is accurate for Marcellus horizontal wells in Brooke, Hancock, Marshall, Ohio, Tyler, and Wetzel Counties.
Looking for the 2023 calculator? Click here.
Looking for the 2024 calculator? Click here.
Looking for the 2025 calculator? Click here.
Disclaimer: Our calculator is not accurate for year 1 of production. First-year well production must be annualized using a different formula.
Calculate your appraised value for each well on your real estate tax ticket. Your royalty interest appraised value total for all wells on your county real estate tax ticket should equal the appraisal value on your notice of increase in appraisal (or be pretty close) and what you will be paying taxes on for the upcoming year.
Your real estate tax bill will be 60% of the appraised value times the applicable county tax rate. Contact WV Tax Division at 304-558-0781 or email ptdoilgas@wv.gov if you feel your appraised value calculation has been calculated in error.
If you want to appeal your appraisal amounts, you need to contact your County Commission office before February 1st of each year. If you miss the time frame to appeal through the County Commission, then you can file an appeal at the WV Office of Tax Appeals. You will need to file a petition for a property tax appeal form. You have one year to ask for exoneration.
Refer to the WV Property Tax, WV Appraisal of Oil and Gas Royalties, and WV Property Tax Forms and Publications pages for additional information.
Legislation is the only way to get things changed, so if you don’t agree with this new yield capitalization model, the way these notices are worded, the difficulty in getting an incorrect valuation corrected, or another problem, then you should contact your legislators in the House and the Senate.
Discuss your problems and your frustrations. Ask for transparency from the WV Tax Division. Transparency should be a requirement to provide the actual calculation numbers and support for each mineral owner’s tax bill.
Keep in mind, paying your mineral real estate tax bill is a deductible expense against your royalty income. If you need professional tax assistance and guidance, contact the Ohio Valley’s only CPA and Certified Mineral Manager.
