The oil and gas market is arguably one of the most rewarding industries for investors looking to generate huge returns. There is an abundance of lucrative oil and gas investment opportunities in Texas that appeal to the objectives of many investors. Investors must, however, be familiar with all the important aspects related to the industry to avail all of the benefits on offer. This is especially true when it comes to tax-related benefits. To help clear the air, we answer a few FAQs about oil and gas investment opportunities.
Is an Oil And Gas Direct Investment Right For Me?
Investors looking to generate handsome returns, enjoy attractive tax benefits, and gain exposure to unmatched growth potential can never go wrong with oil and gas investments. The accurate classification of opportunities allows you to invest without compromising your investment strategies. While oil and gas investment programs are majorly suited for accredited investors that are familiar with the field, it helps to go through oil and gas investment opportunity-related documents to familiarize yourself with potential risks. Working with established oil and gas investment advisors also helps bridge this gap.
What Are The Key Tax Benefits Of Oil And Gas Investments?
Oil and gas investments offer several tax benefits. Net losses are considered as active income that counterbalances any other modes of income. As per the US Tax Code, no working interest of an oil and gas well can be deemed as a passive investment or a passive activity. It can only be considered as an active income of the oil and gas investor and any losses can be balanced against other forms of income such as capital gains, interest, and wages.
What Are Tangible and Intangible Drilling Costs?
Tangible drilling costs refer to the cost of purchasing the various drilling equipment that is used for oil and gas production. On the other hand, the cost of getting intangible drilling equipment such as chemicals, grease, mud, labor, and other similar items is known as intangible drilling cost. Both tangible and intangible costs are 100% tax-deductible, which represents an excellent benefit to oil and gas investors.
Are There Any Lesser-Known Tax Benefits?
Yes! One of the lesser-known tax benefits of oil and gas investment programs is enhanced recovery credit. After extraction over time, oil and gas levels in a well will decrease to a point where it becomes difficult to extract any more. To encourage oil and gas investors to drill beyond this point, the government offers an enhanced recovery credit of 15% to all oil producers that choose to do so.
What Is Alternative Minimum Tax?
As per the US tax laws pertaining to oil and gas investments, alternative minimum tax (AMT) is used to calculate income tax after adding all the tax preferences into the gross income of a taxpayer. For example, the excess intangible drilling costs are referred to as ‘tax preferences’ and are exempted when filing alternative minimum tax returns.
Also Read: Direct and Indirect Investment Options for Oil
Conclusion
Oil and gas investment advisors highly recommend conducting thorough research about available investment programs to arrive at an informed decision. Working with a reputable investment management firm ensures that you achieve your objectives. When looking for oil and gas investment opportunities in Texas, the team of experts at Main Oak Capital is always ready to help you find the best oil and gas investment programs including oil and gas drilling investments. Call at (972) 544-1884 or drop an email at info@mainoakcapital.com to contact our experts or fill out our Contact Form and our team will reach out to you at the earliest.
