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Level 2
April 20, 2026
Question

entering Working interest oil sales and depletion in form 1065

  • April 20, 2026
  • 2 replies
  • 428 views

This is my first time using Turbo Tax (2025) for an LLC partnership for a small working interest oil property. I entered the oil sales in the business sales line. But I have no idea how to enter information for percentage oil depletion. Turbo Tax instructions on this do not work (for me). Can anyone give guidance?

2 replies

PatriciaV
Level 15
April 21, 2026

For most working interest oil producers, you would multiply your gross income by 15% to determine your percentage depletion.

 

More info from the OnDemand Tax Guidance within TurboTax:

 

Percentage Depletion Is calculated by taking a certain percentage, based upon the type of mineral, by your gross income from the mineral property during the year. Gross income includes the amount received for the minerals but not amounts paid for rents and royalties for the property. The deduction using this method cannot be more than 50% of your taxable income from the property without taking into account the depletion deduction. Percentage depletion generally does not apply to oil and gas wells. 

 

Small Producers Exemption:

Generally, small oil and gas producers and royalty owners can use percentage depletion at a rate of 15%. The deduction is limited to the lessor of your taxable income from the property without regard to the deduction for depletion, or 65% of your taxable income from all sources without regard to the deduction for depletion.

 

Depending on the purpose of the extraction, the depletion rate may be different, in a range from 7% to 22% (see 26 U.S. Code § 613 - Percentage depletion for a complete list). 

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Level 2
May 2, 2026

I certainly appreciated the discussion on computation of depletion. However, question is not on how to calculate depletion, but how to enter the calculated number into Turbotax Business so that each K-1 recipient has that amount reflected in their K-1. Is there a place to enter it into Turbotax Business for 1065, such that it flows through to the LLC member's K-1's? Thus, this is an input question. Thank you.