Direct participation in oil and gas can generate several tax benefits. These benefits range from large up front deductions for intangible drilling costs (IDC), to tax credits for the development of certain types of tight formations. Deductions are generated mainly from the cost of non salvageable equipment or services conducted during the drilling phase, testing, and/or completion of the well. The following is a synopsis of the tax benefits generated by direct participation oil and gas investments. There are many oil and gas investment opportunities to create and build wealth in the oil and gas/energy sector. Investing in oil and gas drilling programs, while considered high risk, can offer significant returns and substantial tax advantages. Additionally, domestic oil and gas development helps make our country more energy self-sufficient and reduces our dependence on foreign imports. In light of this, Congress has provided tax incentives to stimulate domestic natural gas and oil production financed by private sources. Investments in oil and gas can have many tax advantages which greatly enhance the economics of Energy LP’s oil and gas investment opportunities.
The tax benefits generated by a direct participation in oil and/or natural gas are substantial. The immediate deduction of the intangible drilling costs or IDCs is very significant, and by taking this up front deduction, the risk capital is effectively subsidized by the government by reducing the participant’s Federal, and possibly state income tax. Each individual participant of course, should consult with their tax adviser.Oil and Gas Tax Benefits