Percentage Depletion

AAA

DEFINITION of 'Percentage Depletion'

A taxable deduction that assigns a set percentage of depletion to the gross income derived from extracting fossil fuels, minerals or other nonrenewable resources from the earth. Percentage depletion is provided as an incentive for drillers and investors to develop domestic mineral and energy production.

INVESTOPEDIA EXPLAINS 'Percentage Depletion'

Oil and gas investments at the wellhead have become one of the most tax-advantaged investments available in America today, because of the depletion allowance. Approximately 15% of all income from oil and gas is tax-free for small investors and producers. There is no dollar limit as to the total amount of depletion one can deduct from income from qualified nonrenewable resources.

RELATED TERMS
  1. Reserves to Production Ratio

    A ratio indicating the remaining lifespan of a natural resource. ...
  2. Tax Shelter

    A legal method of minimizing or decreasing an investor's taxable ...
  3. Depressed

    A state or condition of a market, product or security characterized ...
  4. Deduction

    Any item or expenditure subtracted from gross income to reduce ...
  5. Gross Income

    1. An individual's total personal income before taking taxes ...
  6. Depletion

    An accrual accounting method that companies use to allocate the ...
Related Articles
  1. Investing Basics

    Oil: A Big Investment With Big Tax Breaks

    Oil and gas investments can provide unmatched deduction potential for accredited investors.
  2. Personal Finance

    Pros And Cons Of Offshore Investing

    Tax loopholes are shrinking, but there are still plenty of viable prospects. Get the big picture.
  3. Fundamental Analysis

    Accounting For Differences In Oil And Gas Accounting

    How a company accounts for its expenses affects how its net income and cash flow numbers are reported.
  4. Economics

    What regulations are in place that affect fracking?

    Read about some of the regulations that impact the practice of hydraulic fracturing, which is used to increase oil and gas well output.
  5. Economics

    What causes oil prices to fluctuate?

    Discover how OPEC, demand and supply, natural disasters, production costs and political instability are some of the major causes in oil price fluctuation.
  6. Taxes

    What are the best ways to lower my taxable income?

    Paying taxes is an unavoidable obligation each year, but individuals and business owners can take advantage of various strategies for tax savings.
  7. Fundamental Analysis

    What are the main benchmarks that track the oil & gas drilling sector?

    Read about several different types of benchmarks that investors can use to track the overall performance of the oil and gas drilling sector.
  8. Mutual Funds & ETFs

    These Oil ETFs Offer Cheap, Easy Access

    Interested in investing in oil and the companies that extract and refine it? Here's a list of ETFs. Just be wary of fees.
  9. Taxes

    How To Deduct All Of Your Charitable Donations?

    Donations made to charitable organizations can reduce your taxable income, thus your overall tax bill. But not all donations qualify to be deductable.
  10. Economics

    Sanctions & Falling Oil Prices Hit Ruble Hard

    Russia, through its aggressive actions, has brought upon itself sanctions which, coupled with falling oil prices, have adversely impacted its economy.

You May Also Like

Hot Definitions
  1. Weight Of Ice, Snow Or Sleet Insurance

    Financial protection against damage caused to property by winter weather specifically, damage caused if a roof caves in because ...
  2. Weather Insurance

    A type of protection against a financial loss that may be incurred because of rain, snow, storms, wind, fog, undesirable ...
  3. Portfolio Turnover

    A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by ...
  4. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
  5. Federal Funds Rate

    The interest rate at which a depository institution lends funds maintained at the Federal Reserve to another depository institution ...
  6. Fixed Asset

    A long-term tangible piece of property that a firm owns and uses in the production of its income and is not expected to be ...
Trading Center