Intangible drilling costs are allowable deductions. Drilling is expensive and can cost a lot of money. The only requirement is that this deduction can only be claimed during the same year the well is drilled. If you miss this expense you will not be able to claim it again. This means that the labor costs of the drilling contractor or any professional services you will report to your investor.

Your tangible drilling costs are allowed to be expensed over a seven year period. This is one of the big reasons oil investing is such a good investment. This is because gas investments are deductible for individuals. Drilling for oil is an attempt to produce an asset. You are also allowed 15% annual depletion. The IRS also considers the leasehold costs to depreciate over the lifetime of the well. The Accelerated Cost Recovery System is used to depreciate tangible drilling costs. These tangible items include things like piping, storage tanks, and other equipment that can be capitalized or depreciated.

As an individual who is practicing oil and gas investing you will benefit. The Tax Reform Act of 1986 takes the tax burden from you as a personal investor and places it on the companies. You as a taxpayer now have the ability to shelter your income.

Depletion is a tax benefit of oil investments also. Independent producers may have a depletion. This depletion of gas investments is considered to be a tax write off also. However, the write off allows for a larger deduction of cost depletion and percentage of oil depletion.

If your gas investments turn out to be a nonproducing well or a dry hole you are allowed to write off 100% of all of the money you spent. This write off is against your normal day to day income in the first year of this particular hole.

Oil and gas investing has many tax benefits. There are not many investments you can put your money into that will give you benefits back every year such as these. You can write off many more deductions with this type of an investment than you can with your own home.