# Treatment of depletion and lease bonus
**URL:** https://www.mineralrightsforum.com/t/treatment-of-depletion-and-lease-bonus/85562
**Category:** Accounting and Taxes
**Created:** [January 20, 2026, 4:11am UTC](https://www.mineralrightsforum.com/t/treatment-of-depletion-and-lease-bonus/85562 "2026-01-20T04:11:17Z")
**Posts on this page:** 9
**Page:** 1
### Author:  [@mineralinterested](https://www.mineralrightsforum.com/u/mineralinterested)
#### Post date: [January 20, 2026, 4:11am UTC](https://www.mineralrightsforum.com/t/treatment-of-depletion-and-lease-bonus/85562/1 "2026-01-20T04:11:17Z")
Hello, just clarifying a couple things before tax season.
1. We can deduct 15% of the gross royalties paid as depletion every year as long as wells are producing? Can all royalties be lumped together in one deduction on Schedule E or should they be separated by lease?
2. Bonuses are considered “rent,” not royalty on Schedule E?
Thank you for any help on this.
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### Author:  [@Lee\_Cooper](https://www.mineralrightsforum.com/u/Lee_Cooper)
#### Post date: [January 20, 2026, 4:42am UTC](https://www.mineralrightsforum.com/t/treatment-of-depletion-and-lease-bonus/85562/2 "2026-01-20T04:42:52Z")
I’m not one of the elders, what’s bonuses?
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### Author:  [@TennisDaze](https://www.mineralrightsforum.com/u/TennisDaze)
#### Post date: [January 20, 2026, 5:36am UTC](https://www.mineralrightsforum.com/t/treatment-of-depletion-and-lease-bonus/85562/3 "2026-01-20T05:36:29Z")
Royalties can be combined on Schedule E. Some filers separate by state for easier reporting on different state returns. Be sure to deduct severance tax and other cost deductions on the checks. You can also deduct other direct expenses such as property taxes on wells and legal fees such as for reviewing the oil and gas leases. Lease bonus is reported on rent line because it is not subject to depletion.
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### Author:  [@out\_of\_state](https://www.mineralrightsforum.com/u/out_of_state)
#### Post date: [January 20, 2026, 9:57pm UTC](https://www.mineralrightsforum.com/t/treatment-of-depletion-and-lease-bonus/85562/4 "2026-01-20T21:57:17Z")
Note that you calculate the 15% on the gross. In addition to the deduction for depletion, you deduct severance taxes and what I call “other deductions” that the payors subtract. But of course you don’t subtract the withholdings for your own federal or state income taxes that the payors may have deducted from your checks. I attach a spreadsheet showing gross and subtractions payor by payor, and I segregate NM versus TX on that federal spreadsheet, so that my preparation of NM income tax return is a bit easier. And yes, the bonus amounts are treated as rent on Schedule E. By the way, don’t forget to also subtract your out-of-pocket expenses such as FedEx overnight, legal fees, the occasional look-up on [CountyRecords.com](http://CountyRecords.com), and so on.
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### Author:  [@mineralinterested](https://www.mineralrightsforum.com/u/mineralinterested)
#### Post date: [January 21, 2026, 2:05am UTC](https://www.mineralrightsforum.com/t/treatment-of-depletion-and-lease-bonus/85562/5 "2026-01-21T02:05:52Z")
Appreciate the response - I would have forgotten about the mailing and record search fees, thank you!
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### Author:  [@mineralinterested](https://www.mineralrightsforum.com/u/mineralinterested)
#### Post date: [January 21, 2026, 2:07am UTC](https://www.mineralrightsforum.com/t/treatment-of-depletion-and-lease-bonus/85562/6 "2026-01-21T02:07:18Z")
Thank you for the response, Tennis!
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### Author:  [@mineralinterested](https://www.mineralrightsforum.com/u/mineralinterested)
#### Post date: [January 21, 2026, 2:08am UTC](https://www.mineralrightsforum.com/t/treatment-of-depletion-and-lease-bonus/85562/7 "2026-01-21T02:08:25Z")
Bonus for signing a new lease.
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### Author:  [@dstallard](https://www.mineralrightsforum.com/u/dstallard)
#### Post date: [March 11, 2026, 11:55am UTC](https://www.mineralrightsforum.com/t/treatment-of-depletion-and-lease-bonus/85562/8 "2026-03-11T11:55:09Z")
Aggregate properties. No depletion on lease bonus, not production revenue.
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### Author:  [@system](https://www.mineralrightsforum.com/u/system)
#### Post date: [April 20, 2026, 4:11am UTC](https://www.mineralrightsforum.com/t/treatment-of-depletion-and-lease-bonus/85562/9 "2026-04-20T04:11:59Z")
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