# IRS Depletion Deduction
**URL:** https://www.mineralrightsforum.com/t/irs-depletion-deduction/86434
**Category:** Accounting and Taxes
**Created:** [March 10, 2026, 7:12pm UTC](https://www.mineralrightsforum.com/t/irs-depletion-deduction/86434 "2026-03-10T19:12:53Z")
**Posts on this page:** 20
**Page:** 1
### Author:  [@CSR30srlty](https://www.mineralrightsforum.com/u/CSR30srlty)
#### Post date: [March 10, 2026, 7:12pm UTC](https://www.mineralrightsforum.com/t/irs-depletion-deduction/86434/1 "2026-03-10T19:12:53Z")
Through a Royalty Deed I inherited in 2025, I’ve now received one very small, but IRS reportable, sum of money that I need to include on my 1040 and I have a very basic question that I hope someone will answer. The 1099-MISC form that I received only showed 3 amounts, one for royalties, one for production/taxes, and one for total which was the amount I received. I do my own taxes using TurboTax and everything was input correctly, but TurboTax threw in a number for depletion. Since I don’t own the land and am only receiving mineral right royalties, is this depletion even appropriate?
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### Author:  [@dstallard](https://www.mineralrightsforum.com/u/dstallard)
#### Post date: [March 11, 2026, 2:08am UTC](https://www.mineralrightsforum.com/t/irs-depletion-deduction/86434/2 "2026-03-11T02:08:24Z")
Yes, 15% of gross production revenue for % depletion is an allowed deduction.
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### Author:  [@sfchuck](https://www.mineralrightsforum.com/u/sfchuck)
#### Post date: [March 11, 2026, 2:56am UTC](https://www.mineralrightsforum.com/t/irs-depletion-deduction/86434/3 "2026-03-11T02:56:49Z")
It used to be 27%, like many other extractive industries are still allowed, but only under certain circumstances. Most big producers have to use cost depletion, where the cost of drilling and completing a well is deducted over the life of the well.
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### Author:  [@dstallard](https://www.mineralrightsforum.com/u/dstallard)
#### Post date: [March 11, 2026, 6:03am UTC](https://www.mineralrightsforum.com/t/irs-depletion-deduction/86434/4 "2026-03-11T06:03:04Z")
Technically, small producers can take the greater of cost depletion or 15%. Inherited or devised properties get a step-up in basis to FMV on date of decedent’s death, so cost depletion could be higher than % depletion.
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### Author:  [@sfchuck](https://www.mineralrightsforum.com/u/sfchuck)
#### Post date: [March 11, 2026, 11:25am UTC](https://www.mineralrightsforum.com/t/irs-depletion-deduction/86434/5 "2026-03-11T11:25:41Z")
I’d forgotten about that, although I used it to great effect dealing with some inherited interests years ago.
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### Author:  [@Roy](https://www.mineralrightsforum.com/u/Roy)
#### Post date: [March 11, 2026, 1:09pm UTC](https://www.mineralrightsforum.com/t/irs-depletion-deduction/86434/6 "2026-03-11T13:09:59Z")
The 15% depletion deduction is wonderful & don’t forget to claim your _ad valorem_ (property tax) on producing minerals. Some tax preparers are ignorant of the depletion allowance. Turbotax will enter your royalty income on Schedule E (supplemental income) line 4, then automatically enter your 15% depletion on line 18. You can claim the 15% depletion every year as long as you receive royalties. Big royalty investors may choose a more complicated depletion method, which is impractical for small royalty owners.
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### Author:  [@CSR30srlty](https://www.mineralrightsforum.com/u/CSR30srlty)
#### Post date: [March 11, 2026, 6:09pm UTC](https://www.mineralrightsforum.com/t/irs-depletion-deduction/86434/7 "2026-03-11T18:09:00Z")
Thank you all for the quick replies! I almost deleted the entry just to get my taxes finished, but I’m so glad I asked first.
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### Author:  [@CSR30srlty](https://www.mineralrightsforum.com/u/CSR30srlty)
#### Post date: [March 11, 2026, 6:34pm UTC](https://www.mineralrightsforum.com/t/irs-depletion-deduction/86434/8 "2026-03-11T18:34:05Z")
Thank you, Roy, but this prompts another question: _ad valorem_ tax would only apply to property that I owned, correct? I don’t own the land. I just inherited a fractional royalty interest and am struggling through the learning process now.
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### Author:  [@E\_W\_WILLIS](https://www.mineralrightsforum.com/u/E_W_WILLIS)
#### Post date: [March 11, 2026, 6:57pm UTC](https://www.mineralrightsforum.com/t/irs-depletion-deduction/86434/9 "2026-03-11T18:57:44Z")
At some point you will receive an ad valorem tax bill from the tax assessor/collector for your mineral interest. You can deduct the property tax in the year paid, subject to some limitations. If it is a very small interest the county may not tax it as it is not worth the expense.
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### Author:  [@dstallard](https://www.mineralrightsforum.com/u/dstallard)
#### Post date: [March 11, 2026, 7:47pm UTC](https://www.mineralrightsforum.com/t/irs-depletion-deduction/86434/10 "2026-03-11T19:47:42Z")
In Texas, royalty interests are real property subject to ad valorem taxes. Not sure about other states, but likely the same under old English common law, considered an interest in the land.
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### Author:  [@sfchuck](https://www.mineralrightsforum.com/u/sfchuck)
#### Post date: [March 11, 2026, 9:19pm UTC](https://www.mineralrightsforum.com/t/irs-depletion-deduction/86434/12 "2026-03-11T21:19:17Z")
List GROSS royalties on Schedule E, subtract taxes (severance and ad valorem), production costs and depletion on appropriate lines.
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### Author:  [@dstallard](https://www.mineralrightsforum.com/u/dstallard)
#### Post date: [March 11, 2026, 9:38pm UTC](https://www.mineralrightsforum.com/t/irs-depletion-deduction/86434/13 "2026-03-11T21:38:30Z")
Schedule E, not A.
A is for personal itemized deductions, such as your home.
E is for deductions for rental/royalty properties.
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### Author:  [@CSR30srlty](https://www.mineralrightsforum.com/u/CSR30srlty)
#### Post date: [March 12, 2026, 12:55am UTC](https://www.mineralrightsforum.com/t/irs-depletion-deduction/86434/14 "2026-03-12T00:55:43Z")
Thank you. TurboTax and I got that part done right. I was just surprised that the depletion allowance popped up, but I’m glad to know it’s applicable.
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### Author:  [@A\_Monty](https://www.mineralrightsforum.com/u/A_Monty)
#### Post date: [March 12, 2026, 9:05pm UTC](https://www.mineralrightsforum.com/t/irs-depletion-deduction/86434/15 "2026-03-12T21:05:14Z")
Not the same. Oklahoma counties do not charge property taxes on royalty interests.
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### Author:  [@Roy](https://www.mineralrightsforum.com/u/Roy)
#### Post date: [March 12, 2026, 10:04pm UTC](https://www.mineralrightsforum.com/t/irs-depletion-deduction/86434/16 "2026-03-12T22:04:27Z")
Thanks for reducing my taxes sfchuck & dstallard. I claimed my minerals taxes & surface tax as an itemized deduction alongside taxes on my home, and IRS limited the amount of deductions. I did not in the past put my county minerals & surface _ad valorem_ taxes on Schedule E as an offset expense to reduce my taxable royalties. I use TurboTax, so it’s easy to amend my past tax returns.
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### Author:  [@Roy](https://www.mineralrightsforum.com/u/Roy)
#### Post date: [March 12, 2026, 10:07pm UTC](https://www.mineralrightsforum.com/t/irs-depletion-deduction/86434/17 "2026-03-12T22:07:11Z")
Excellent CSR30srlty, I smile every year when that 15% depletion allowance reduces my taxable royalties. You can continue applying the 15% depletion every year until Congress takes it away.
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### Author:  [@M\_Barnes](https://www.mineralrightsforum.com/u/M_Barnes)
#### Post date: [March 13, 2026, 12:49pm UTC](https://www.mineralrightsforum.com/t/irs-depletion-deduction/86434/18 "2026-03-13T12:49:51Z")
Congress repeatedly comes back to look at that 15% depletion. Stay alert on the issue. The National Association of Royalty Owners constantly monitors the situation to make sure that royalty owners are protected on that front.
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### Author:  [@Steve\_Hunt](https://www.mineralrightsforum.com/u/Steve_Hunt)
#### Post date: [March 14, 2026, 10:12pm UTC](https://www.mineralrightsforum.com/t/irs-depletion-deduction/86434/19 "2026-03-14T22:12:32Z")
Also if you are an Oklahoma resident, your percentage depletion is 22%. It will show up as an adjustment on your Oklahoma return.
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### Author:  [@Robin](https://www.mineralrightsforum.com/u/Robin)
#### Post date: [March 17, 2026, 4:27pm UTC](https://www.mineralrightsforum.com/t/irs-depletion-deduction/86434/20 "2026-03-17T16:27:34Z")
I’ve been using TurboTax for several years, and the depletion is calculated for me. I’ve never been audited or questioned by the IRS. I was glad to see the other comments that were similar to mine.
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### Author:  [@system](https://www.mineralrightsforum.com/u/system)
#### Post date: [June 8, 2026, 7:13pm UTC](https://www.mineralrightsforum.com/t/irs-depletion-deduction/86434/21 "2026-06-08T19:13:33Z")
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