From 24/7 Wall St. · Gerelyn Terzo · · 1m 10s
Geothermal Lease Shifts Social Security Tax Rules
Timberland geothermal leases can boost Social Security taxes without counting as earnings.
In brief
Timberland geothermal leases can boost Social Security taxes without counting as earnings. Geothermal royalties on timberland may count as $0 toward Social Security earnings test but increase taxable benefits by up to 75%. Originally reported by 24/7 Wall St..
Geothermal Lease on Timberland
Weyerhaeuser leased 145,000 acres of Washington and Oregon timberland to Hexagon Energy for geothermal rights.
Social Security Earnings Test
Before full retirement age, Social Security counts earnings toward the earnings test with a $24,480 limit for 2026.
Geothermal Royalties Count as $0
Passive geothermal royalties reported on Schedule E count as $0 toward earnings test despite $30,000 royalty checks.
Taxable Income Increases
The $30,000 royalty raises combined income from $25,000 to $55,000, making 75% of Social Security benefits taxable.
Tax Impact Calculation
An additional $6,282 in federal tax results from the royalty versus $3,600 on the royalty alone at 12% marginal rate.
Active vs Passive Income
If the owner runs extraction operations, income moves to Schedule C and counts toward earnings test.
Key Questions Before Signing
Check payment types, ownership role, current earnings, and combined income to avoid tax surprises.
Here's the gist
Geothermal royalties on timberland may count as $0 toward Social Security earnings test but increase taxable benefits by up to 75%.
