How do I take a Depletion Allowance on my Oil & Gas royalties and also deduct the taxes paid on those royalties?

[Mike9241]

use schedule E property type 6. Depletion has to be computed by you. Usually, you get a packet from the royalty operator sometime in February which gives you all the details.  

here are the general rules.

you get to take the larger of cost depletion or % depletion

cost  = unrecoverable depletable costs/ estimated recoverable reserves at the beginning of the year X units sold in 2024

% =15% of gross receipts

must be an independent producer or royalty owner

limited to the lesser of net royalty income before this deduction or 65% of taxable income before this deduction