Depletion is an
accounting concept used most often in
mining,
timber,
petroleum, or other similar industries. The depletion deduction allows an owner or operator to account for the reduction of a product's reserves. Depletion is similar to
depreciation in that, it is a cost recovery system for accounting and tax reporting. For tax purposes, there are two types of depletion; cost depletion and percentage depletion. For mineral property, you generally must use the method that gives you the larger deduction. For standing timber, you must use cost depletion.