What is the yearly deduction called that allows recovery of investment in minerals or standing timber?

The yearly deduction that allows for the recovery of investment in minerals or standing timber is known as depletion. This tax deduction is specifically designed to account for the reduction in the value of natural resources as they are extracted or used.

Depletion applies to natural resources such as oil, gas, coal, and timber, recognizing that these resources are finite and diminish as they are harvested or removed. Taxpayers can apply this deduction to recover their investment in these resources over time as they deplete in value, thereby providing a financial incentive for the responsible extraction and use of natural resources.

In contrast, depreciation refers to the deduction for the wear and tear of tangible assets such as machinery and buildings, while amortization deals with the gradual write-off of intangible assets, such as patents or copyrights. Exhaustion is a term often used interchangeably with depletion in a more colloquial sense but is not the formal name for the deduction concerning natural resources. Therefore, depletion is the correct term and concept that applies here.