Gravel or sand extraction belongs on Line 12, depletion.
Why line 12
If you run a pit or quarry and sell the material you dig out, the cost of the deposit itself is recovered as depletion on line 12. You spread your basis in the deposit over the estimated recoverable cubic yards or tons and deduct that rate on the volume sold in the year. This is a working business deduction, not something a service business ever touches, and a one-time sale of gravel rights is usually handled as a sale of an interest in the land instead.
Stop looking up lines one at a time. ClaryBook totals your year into an IRS Schedule C worksheet in form order, Part I and Part II line by line, so gravel or sand extraction lands on Line 12 without you sorting it.
Start for freeWhat gravel or sand extraction is confused with
- Line 13, depreciation and section 179 expense deduction
- The excavator, crusher, scales and haul trucks are equipment, depreciated through Form 4562 to line 13, while only the deposit is depleted.
- Line 21, repairs and maintenance
- Pit access road upkeep, screen repairs and conveyor servicing are repairs and maintenance on line 21.
- Line 23, taxes and licenses
- Extraction permits, severance taxes and local licences are taxes and licences on line 23.
Examples that belong on line 12
- Cost depletion on 20,000 tons of gravel sold from a pit with a measured reserve
- A contractor extracting fill from their own land and selling it by the load
- Depletion on a purchased sand deposit, spread across estimated recoverable yards
- A small quarry recovering the price paid for the deposit as material leaves the site
What does not belong here
- Aggregate you buy from another pit to resell, which is inventory in Part III
- Reclamation equipment and site machinery, which are line 13
- The land's residual value after extraction, which is not depletable
- Hauling and trucking costs, which are line 9 or an other expense on line 27a
The limit that applies
Your cumulative depletion cannot exceed your basis in the deposit, and the portion of the purchase price allocated to the land itself is never recovered through line 12.
What to keep
Keep the purchase or appraisal documents that split land value from deposit value, an engineer's estimate of recoverable volume, and scale or load tickets for the year's production.
Other expenses on line 12
| Expense | Line |
|---|---|
| a mineral or oil and gas interest | Schedule C, Line 12 |
| timber cut from land you own | Schedule C, Line 12 |
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Sources
This page explains how Schedule C lines work. It is general information, not tax advice for your situation. If an expense is large or the answer turns on a fact about your business, confirm it with your tax preparer.
Looking for a different expense? The full Schedule C line lookup has every line from 8 to 27 with the expenses that belong on each, and Schedule C expense categories walks the whole form in order.
Stop looking up lines one at a time. ClaryBook totals your year into an IRS Schedule C worksheet in form order, Part I and Part II line by line, so gravel or sand extraction lands on Line 12 without you sorting it.
Start for free