Royalties

Royalties. A. This type of income is defined as follows: 1. Royalties include compensation paid to the owner for the use of property, usually copyrighted material, e.g., books, music or art, or natural resources, e.g., minerals, oil, gravel or timber. a) Royalty compensation may be expressed as a percentage of receipts from using the property or as an amount per unit produced. To be considered royalties, payments for the use of natural resources also must be received: 1) Under a formal or informal agreement whereby the owner authorizes another individual to manage and extract a product (like timber or oil) and 2) In an amount that is dependent on the amount of the product actually extracted. B. This type of income is treated as follows: 1. Royalties are counted as unearned income unless they are: a) Received as part of a trade or business; or b) Received by an individual in connection with any publication of his work. 1) Royalties earned by an individual in connection with any publication of his work are earned income (for example, publication of a manuscript, magazine article or artwork). 2. Under liberalized income policy, interest, dividend and royalty income that does not exceed $5 per month per individual is excluded. The exclusion applies to either income type or a combination of the three types up to the $5 maximum.