Tax Break of 2022: Direct Investment in Oil & Gas & 100% Tax Write-Off of Intangible Drilling Costs (IDC).
Expensing exploration, development, and intangible drilling expenses is one of the federal income tax provisions that support domestic fossil extraction. The use of percentage depletion instead of cost depletion to recover drilling and development investment of oil and gas wells and coal mines; many smaller incentives for producing and distributing coal, oil, and natural gas.
The two most considerable subsidies are:
- The expensing of exploration and development expenditures.
- And the excess percentage over cost depletion.
IDCs, or intangible drilling costs, are all costs that an operator may spend at the well site but don’t result in producing a tangible asset. In the oil and natural gas industry, personnel expenditures, site preparation, and renting drilling equipment cannot be recovered.
Among the various tax-deductible investments, oil investment tax breaks offer several advantages particular to the sector, for instance, the tax treatment of intangible drilling costs, which is 100% deductible.
Regardless of how much they have invested, producers can deduct an annual set percentage of gross revenue as capital expenses thanks to the excess percentage over cost depletion.
Independent producers are permitted by federal tax law to deduct 15% of their gross revenue from their oil and gas holdings as percentage depletion, while integrated firms are not.
Contrarily, traditional cost depletion enables the deduction of actual expenses as a well or mine’s resources have been used up.
Stop throwing your money today, and put it to work for you rather than paying Uncle Sam more.