StructuredSales.org
StructuredSales.org
Wyoming sellers are not one market. A Powder River Basin royalty owner who has been receiving checks since a horizontal well was drilled. A Sheridan County ranch family selling grass and keeping the minerals, or selling both. A Teton County commercial building whose value has nothing to do with cattle and everything to do with land prices that make a 1031 feel like the only grown-up option. What they share is the state income-tax line: there isn't one, for individuals or for corporations. What they do not share is the federal profile of the gain, or the severance tax that keeps running on production they have not sold.
A structured installment sale under IRC §453 is a federal timing choice. It can pull part of a long-term gain back into the 0% or 15% band, shrink the 3.8% net investment income tax, and turn a mineral buyer's wire into a schedule. It does not cut the severance tax on wells you still own, and a Wyoming trust does not make the federal gain disappear.
A June 2025 legislative summary of Wyoming tax rates lists individual income tax and corporate income tax at 0%, with a note to Article 15, Section 18 of the state constitution. The Tax Foundation's 2026 index makes the same point and adds that Wyoming, with South Dakota, is one of two states that levy neither income tax and also skip a statewide gross-receipts tax. Property tax is the local cost of holding a ranch. Assessments and mill levies vary. They are not a tax on the gain at closing, and this page does not quote a county mill levy.
Severance tax is the state tax mineral owners actually feel. Wyoming Statutes section 39-14-204 sets the total severance tax on crude oil, lease condensate, or natural gas at 6% in the general case, made up of the constitutional 1.5% and additional statutory rates, with exceptions elsewhere in the article for some stripper, tertiary, and new production. The 2025 legislature also cut the surface-coal rate to 6% effective July 1, 2025. None of that is a tax on the sale of the royalty. It is a tax on production, typically settled in the division order and the check, and it continues for whatever interest the seller retains. Selling the interest converts future ordinary royalty into a gain transaction, subject to section 1254 if depletion or intangible drilling costs reduced basis, and subject to a basis step-up if the interest came from a decedent. Inherited basis is often the number that decides whether a sale is a tax problem at all.
Wyoming is a common home for directed trusts and for trusts meant to last a long time, in part because the state does not tax the income. Families hear that and conclude the gain can be parked. Transferring appreciated ranch or royalty into a trust can be a completed gift, a grantor-trust non-event that leaves the income taxed to you, or something a drafter has to read the instrument to name. A later sale is still a federal sale. The plan that erases gain for heirs is holding until death, covered in sell or hold for a stepped-up basis. Federal estate tax can still apply. A state with no income tax has not repealed that.
For 2026, Revenue Procedure 2025-32 puts the joint 0% band at taxable income up to $98,900 and the 15% band through $613,700. The joint standard deduction is $32,200. NIIT of 3.8% starts when MAGI exceeds $250,000. A couple with about $100,000 of pension income still has a slice of the 0% band, which a lump sum uses once and an eight-year schedule reuses. On a Teton building, unrecaptured section 1250 gain can be reported as payments arrive at a maximum of 25%, while section 1245 recapture is ordinary income in the year of sale. Owners who want replacement property should read the 1031 comparison.
A married couple under 65, Wyoming residents, sells a royalty interest held for many years. Other AGI is $100,000 of pension, treated as outside net investment income. Taxable income before the sale is $67,800, so $31,100 of the 0% band remains ($98,900 minus $67,800). Section 1254 recapture, if any, is ordinary income in the year of sale and is omitted. The long-term gain in the table is $1,280,000, recognized at once or as $160,000 a year for eight years. The face amount in this example is under the $5 million section 453A threshold; a larger package of interests would need the interest-charge computation, and a royalty held for investment is not farm property. Brackets stay flat. Ordinary interest inside the payments is excluded. Ongoing severance tax on any wells not sold is excluded, because it is not a tax on this gain.
| 2026 federal estimate | Lump sum | Each of 8 years | Eight years combined |
|---|---|---|---|
| Long-term gain recognized | $1,280,000 | $160,000 | $1,280,000 |
| Gain at 0% | $31,100 | $31,100 | $248,800 |
| Gain at 15% | $514,800 | $128,900 | $1,031,200 |
| Gain at 20% | $734,100 | $0 | $0 |
| Long-term capital gains tax | $224,040 | $19,335 | $154,680 |
| NIIT at 3.8% | $42,940 | $380 | $3,040 |
| Estimated federal tax on this gain | $266,980 | $19,715 | $157,720 |
The difference is about $109,260 on these assumptions, before time value and tax on interest. The lump sum puts $734,100 in the 20% band. The installment does not: each year, taxable income is $227,800. Lump-sum NIIT is 3.8% of $1,130,000 (MAGI of $1,380,000 minus $250,000). An installment year has MAGI of $260,000, so NIIT touches only $10,000. That last figure is fragile. A few thousand dollars of other investment income would use it up. Wyoming adds no income tax to either column. The calculator is the place to swap in your basis. The §453A calculator matters only if the obligations are large and are not farm property.
The buyer of a royalty package usually pays cash. The seller who wants a schedule has the buyer pay the deferred portion at closing to an assignment company, which funds payments with an annuity from a rated carrier. Form 6252 does the rest. Collection risk on a private note is a different product, described in seller financing. How a schedule can stand in for the royalty checks you are giving up is in retirement income from a sale.
A completed change of domicile before the sale can keep Wyoming real property off a former state's income tax, because that gain is sourced to Wyoming. California Publication 1100 is explicit that real property is taxed where it sits, and that installment gain on California real property stays California-source after you leave. The same publication taxes the gain portion of stock sold while you were a California resident, even when the payments arrive after a move. Interest on the note generally follows residence at receipt. If you are still a California resident on closing day, California taxes the Wyoming gain along with everything else. Colorado residents owe Colorado tax on worldwide income until residency actually ends. A Wyoming address does not close a Colorado return. Neighbors with their own income taxes include Montana, Utah, Idaho, and Nebraska. California, New York, New Jersey, Oregon, Minnesota, and Illinois each tax nonresidents on in-state real property, and several of them reach entity interests that are mostly in-state real estate. Domicile is where you live and intend to remain. A cabin in Teton County plus a house you still occupy somewhere else is a fact pattern, not a plan.
Section 453(e) can accelerate gain if a related buyer resells within two years. Section 453(g) generally blocks installment reporting on depreciable property sold to a related person. Dealers cannot use the installment method. Those limits apply in a state with no income tax exactly as they apply everywhere else.
No. Wyoming does not impose an individual income tax or a corporate income tax. Federal long-term capital gains rates of 0%, 15%, and 20%, and the 3.8% net investment income tax, are the income taxes on a sale of a ranch, a royalty, or a business. Property tax is a cost of holding land. It is not a tax on the gain.
Wyoming Statutes section 39-14-204 imposes a severance tax on crude oil, lease condensate, and natural gas that is generally 6% of value, with statutory exceptions and reduced rates for some production. That tax follows production. Selling the royalty is a separate federal gain transaction. If depletion or drilling costs reduced your basis, section 1254 can recapture part of the amount as ordinary income in the year of sale.
No. Wyoming is used for directed trusts and long-duration trusts in part because the state has no income tax. A trust's tax residence does not, by itself, remove federal capital gains tax from the person who sells. Transferring appreciated property to a trust can be a gift or can leave the gain taxable to the grantor. Holding until death for a basis step-up is a different plan from selling.
Depreciation and depletion recapture are taxed in the year of sale. The section 453A interest charge can apply when non-farm installment obligations exceed $5 million. Related-party resales and sales of depreciable property to related persons have their own limits. Spreading a gain can lower the federal rate and the net investment income tax. Those results are estimates that depend on your other income.
California taxes installment gain on California real property after you move, and it can tax the gain portion of stock sold while you were a California resident. Interest on a note is generally sourced to your residence when you receive it. A completed move before you sell Wyoming property can keep that Wyoming real estate off the California return. If you are still a resident of a taxing state on the day of sale, that state taxes the gain. Colorado, New York, New Jersey, Oregon, Minnesota, and Illinois have their own residency and sourcing rules.
Last reviewed: October 22, 2026. Severance-tax exceptions for specific wells were not modeled. Colorado residency is described only in general terms; the Colorado guide covers that state's own rules.
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