The Different Tax Benefits of Investing in Oil and Gas

With oil and gas production both more than doubling in America alone, there are some very robust tax benefits to investing in this industry. In fact, nowhere else in the tax code are there quite so many advantages as you’ll find as a crude oil and natural gas investor. But as with any tax code, it can be hard to spell it out in easy-to-understand terms for those who want to get straight to the point. Here’s what you need to know:

There are nine main deduction options that make up the oil tax benefits in this industry:

  • A 100% deduction on the costs of tangible drilling
  • A complete write-off for the first year of intangible drilling costs, such as labor, supplies, and equipment
  • A deduction for lease costs
  • A 15% tax exemption on gross income earned from gas and oil
  • Deductions for both passive and active income streams related to your investments in oil and gas
  • An alternative minimum tax on certain investment profits
  • A tax credit of up to $9 per day for stripper wells
  • The ability to asset swap, also called a 1031 exchange
  • A 15% recovery credit

Not all investors will receive all nine of these oil tax benefits, but most investors will be able to stack several of these deductions or tax benefits on top of each other for serious savings in January. To maximize your tax benefits, it’s a good idea to have a tax professional look at the qualifiers for each of the benefits to be sure you are investing in the right types of projects.

For example, there are specific items that can be considered “intangible drilling costs” included in the second deduction option listed above. In addition to labor, supplies, and equipment, you may also be able to write off costs associated with the fracking process, mud drilling, and more.

When you’ve determined exactly how you want to enhance your investment portfolio for better oil tax benefits, you can come to Crudefunder’s platform with as little as $1,000 to get started. That’s all it takes to see huge benefits on your tax bill next year, and we offer a variety of projects so that you can choose only those that will offer you the best tax benefits possible. Find out more about becoming an investor by browsing our available projects today.