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Definition · Energy

Percentage Depletion

A deduction that lets eligible small producers and royalty owners deduct a percentage of gross well income, subject to limits.

Nashional Investments · Updated October 2026

Educational definition only, not investment, tax or legal advice.

In practice

Energy programs can produce large first-year deductions, but they are speculative and illiquid, and the tax result depends on how the interest is held. The term Percentage Depletion is part of how we evaluate an oil and gas program, alongside the operator's history, the well costs and how the deduction fits the rest of your tax picture. We coordinate the details with your CPA.

Questions

Common questions.

What does the term Percentage Depletion mean?
A deduction that lets eligible small producers and royalty owners deduct a percentage of gross well income, subject to limits.
Why does Percentage Depletion matter for investors?
Energy programs can produce large first-year deductions, but they are speculative and illiquid, and the tax result depends on how the interest is held. The term Percentage Depletion is part of how we evaluate an oil and gas program, alongside the operator's history, the well costs and how the deduction fits the rest of your tax picture.
Related terms
Intangible Drilling CostsTangible Drilling CostsWorking InterestRoyalty Interest

All terms

Where it applies

See how this fits into a real plan on our Energy page.

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