In past years I determined my Depletion amount (line 18 on Schedule E [Form 1040]) by referring to instructions in IRS Publication 535 (Business Expenses). I used the Percentage Depletion which seemed pretty simple and straightforward by simply taking 15% of my gross annual royalties as my depletion, at least as I understood it.
From what I see on their website, for 2023 the IRS has discontinued Publication 535 and, best as I can understand, the IRS directs you to other publications, etc depending on the topic. Maybe I’m missing something, but it’s confusing to me as to which IRS Publication (and where in that publication) I will now find the topic of Percentage Depletion as it concerns oil & gas royalties for 2023.
Where will I now find the IRS’s 2023 instructions for Percentage Depletion? (And is it still as simple as taking 15% of your gross annual royalties?)
Just to let everyone know, I (the one who posted this question) realize that people who reply to my post can’t provide legal or accounting advice. Since it seems to have changed from 2022’s IRS info, I haven’t yet been able to find the appropriate section in IRS documents that deal with the 2023 Percentage Depletion Deduction. If anyone has already dealt with this in preparing their 2023 tax return and can possibly point me in the right direction in the 2023 IRS documents I’d sure appreciate it. (And yes, I typically try to do my own tax returns as my situation is not terribly complicated … if anything dealing with Oil & Gas can be called “not terribly complicated” !!) Thanks for any help anyone has to offer.
Internal Revenue Code Sec 613A(c)(6)(C) sets depletion at 15%, with a formula for adjustment for marginal wells when oil prices are below $20. Rate has remained at 15% since 2001.
Just an FYI for mineral owners…
This is a very important deduction. The National Association of Mineral Owners (NARO) watches the US Congress on this one. Over the years, there have been several attempts to get rid of this deduction. NARO has been successful in their lobbying and informational contacts (plus letter writing campaigns by NARO members) with congressmen and women in the states with mineral owners to keep this deduction for the over 12 million mineral owners in the country. If it comes up again, you will be hearing about it!