An investment in Oil and Gas will not only make you money in the future, it provides you with valuable tax benefits in the short term that are quite appealing for both seasoned and first-time investors. While these benefits are available to all those who invest, it’s a good idea to consult with an accountant to be sure you receive the full benefits of your investment.
Intangible Drilling Costs (IDC)- IDC is defined as the intangible costs involved in drilling a well, except the drilling equipment. These costs include labor, mud, grease, supplies, and anything else utilized during the process. These costs are generally estimated at 60%-80% of all the expenses involved in the well drilling, and they are 100% deductible in the year incurred. These deductions are applicable whether the well is productive or not.
Lease Costs- Any costs incurred for the purchase of leases and mineral rights, operational costs and administrative costs are all fully tax deductible in the year incurred.
Domestic Production Activity Deduction (DPD)- DPD is a deduction under Section 199 of the Internal Revenue Code that applies to domestic production organizations such as manufacturing, construction, and oil and gas. Receipts from the lease, rental, license, sale or exchange of qualified products can be partially deducted from the year incurred.
Tangible Drilling Costs- Tangible Drilling Costs are the hard costs for the actual drilling equipment used during the drilling process. These costs are fully deductible, and equipment placed in service before January 1, 2013 is eligible for 100% bonus depreciation.
These are just some of the many tax benefits available to oil and gas investors. As tax law can change, it is imperative that you have a good working relationship with an accountant that is familiar with oil and gas investing and tax law. Other tax benefits include Completion Costs, Depletion Allowance, Intangible Completion Costs and others.
Learn more about tax benefits in oil and gas investing. Call PetroChase at 888-207-3876 or email us firstname.lastname@example.org.