Depletion is the using up of natural resources by mining, drilling, quarrying stone, or cutting timber. The depletion deduction allows an owner or operator to account for the reduction of a product's reserves.
There are two ways of figuring depletion: cost depletion and percentage depletion. For mineral property, you generally must use the method that gives you the larger deduction. For standing timber, you must use cost depletion.
To enter depletion reported on a Schedule K-1, from the Main Menu of the tax return (Form 1040) select:
- Income
- Rents, Royalties, Entities (Sch E, K-1, 4835, 8582)
- K-1 Input
- Select New, double-click the entry you wish to Edit, or select Pull to pull data from either the business program or prior year data.
- Line 9B for Form 1041
- Line 15C for Form 1120S
- Line 17C for Form 1065
To report depletion on Schedule C that has already been created (see here for instructions), from the Main Menu of the tax return (Form 1040) select:
- Income
- Business Income/Loss (Sch C, 1099MISC)
- Expenses
- Depletion
To report depletion on Form 6251, from the Main Menu of the tax return (Form 1040) select:
- Other Taxes
- Alternative Minimum Tax (6251)
- Adjustments and Preferences
- Depletion
NOTE: This is a guide on entering depletion into the TaxSlayer Pro program. This is not intended as tax advice. For additional information refer to the Additional Information below.
Additional Information:
Publication 535, Business Expenses
