Oil and gas depletion can be calculated using the DEPL screen on the Adjustments tab.

1. View the completed Form 1040 and locate the taxable income line. Enter this amount on the DEPL screen, line 17.

2. Complete the For and MFC fields.

3. Select 15% or 22% from the Applicable Percentage drop list. The DEPL screen calculates only oil and gas depletion and requires either 15% or 22%.

4. If you enter data in both the Cost Depletion and Percentage Depletion sections, the program calculates the best deduction for the taxpayer.

5. Enter any other necessary information on the DEPL screen.

6. View the return and look for Wks DEPL.

See Publication 535 for more information on calculating depletion.

K-1 Check Box

Depletion and intangible drilling cost deductions are generally associated with oil and gas activities. When there is royalty income in Schedule K-1, box 7, depletion and intangible drilling cost deductions flow to Schedule E, page 1 to match the deductions to the related income.

To force any depletion or intangible drilling cost deductions to be printed on Schedule E, page 2: 

• on the K1P screen, mark the Oil and gas partnership box

• on the K1S screen, mark the Oil and gas corporation box

In short: 

• If the check box is selected, the amount is forced to Schedule E, page 2.

• If the check box is not selected, the amount flows to Schedule E, page 1.