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What Is Percentage Depletion for Taxes?

January 24, 2023

Percentage depletion is a tax provision that helps independent producers and royalty owners account for the reduction of a nonrenewable mineral resource, such as oil, gold, and iron, and to recover the associated cost. Another option for depletion is the cost depletion method. This deduction is very similar to depreciation but is specific to the natural resource industry.

Who Qualifies for the Percentage Depletion Deduction

Depletion can be claimed by individuals, corporations, estates, and trusts with an economic interest in an income-generating natural resource (except timber). If you possess any of the following types of economic interests, you may be eligible to take advantage of this extremely valuable tax saving tool.

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