If we consider all the major investment options available to a high net-worth individuals and accredited investors, oil and gas investments stand out to be the one with the most notable tax benefits. The oil and gas industry is strongly supported by the US government, making it investor friendly and less prone to sudden or drastic changes that can negatively impact investments. These factors make direct investments in oil and gas a great alternative to traditional investment options such as stocks. If you are looking for a reliable energy investment company, look no further – Fig Tree Capital Ventures provides promising investment options in the oil and gas industry for qualified investors. Continuing on the subject, we present an overview of the tax advantages of investing in the oil and gas industry.
Intangible Drilling Costs
In any typical oil and gas project, 60-80% of the capital is vested in ‘intangible drilling costs.’ The costs for acquiring labor, grease, mud, chemicals and other consumables come under intangible drilling costs. Apart from intangible costs, we also have tangible drilling costs which revolve around the cost for drilling equipment. Tangible drilling costs are 100% deductible within the year or in the first 7 years for tangible drilling costs.. These are some of the biggest and most fundamental tax break of the oil and gas industry.
According to the US provisions of the tax code, the working interest in any oil and gas project must be regarded as an active income. When the working interest cannot be considered as a passive activity, all the net losses incurred in the project’s duration can be offset against other income forms such as wages. This way, an investor can be heavily favored as he or she can reap the most out of their investment. Even a relatively small sized investment in this industry has the potential to reap a huge return.
Exemption of Small Producers
The small producer tax exemption is an important and an advantageous tax benefit that deals with the income of an oil and gas project. The well owners or participants can shelter a part of their gross income derived from sale of oil and gas by citing depletion deductions as the reason. According to this exemption, 15% of the gross working interest coming from a gas or oil well is exempted from tax. This tax benefit is not applicable to large companies and operators that sell through retail outlets. It is exclusive for firms averaging less than 50,000 barrels per day. In few cases, if a firm has an average daily production of 1000 barrels, it might be ineligible for this exemption.
Oil and gas investments are the go-to option for investors looking to expand and diversify their portfolio. Investing in oil and gas has multiple rewards such as massive tax breaks, a handsome potential return on investment, inflation protection, and more. If you are thinking of putting your money in an energy investment project and are on the look-out for reliable oil and gas investment services, Fig Tree Capital Ventures is here to help. To learn more about potential oil and gas investment opportunities, fill out our contact form or simply call +1-866-304-9194.