Tangible Drilling & Development Cost Benefits

The entirety of the investment allocated to equipment, known as "Tangible Drilling Costs (TDC)", is fully tax deductible. In the scenario outlined in the previous example regarding "IDCs", the remaining tangible costs, such as equipment, totaling $20,000, can be deducted through depreciation over a seven-year period. This advantageous tax treatment is outlined in Section 263 of the Tax Code.

The Benefit

The tangible equipment essential to a drilling project, including pipe, cement, electrical components, and fluids, comprises the remaining portion of cumulative expenses required for drilling and completion of a new well. This added value enhances the attractiveness of the investment, particularly for individuals seeking to minimize their tax liability with the IRS.

Nobody invests for tax deductions alone, but they are incredibly powerful

Investing in oil and gas offers unique opportunities to enhance your portfolio in ways that other investments may not match. The added benefit of reducing tax liability while participating in the energy sector provides a distinct value proposition unmatched by any other industry.