Tax Advantages of Oil & Gas Investments

Offset Taxes. Maximize Returns. Invest Smarter.

Why Oil & Gas Investments Offer Unique Tax Benefits

One of the most compelling reasons to invest in oil and gas is the opportunity for substantial tax savings. Renown Resources offers direct participation partnerships that provide qualified investors with multiple tax advantages, many of which are unavailable through traditional investments like stocks or real estate.

These incentives are designed to promote domestic energy production—and smart investors are using them to maximize returns while lowering their tax burden.

While oil and gas investments may provide certain tax advantages, tax laws are complex and subject to change. Investors should consult with a qualified tax professional to understand the specific implications.

100% Deductible Intangible Drilling Costs (IDCs)

Up to 80% of your investment may be fully deductible in the first year.

Intangible Drilling Costs cover expenses like labor, chemicals, site preparation, and equipment rentals—essentially, anything that doesn’t have salvage value. These costs typically make up 60–80% of the total drilling expense and are 100% deductible in the year incurred, even if the well doesn’t produce.

This is one of the most powerful deductions available in the energy sector.

Tangible Drilling Cost Depreciation (TDCs)

Recover the value of physical assets over time.

Tangible Drilling Costs include expenses for well equipment—such as casings, tanks, and wellheads. These costs aren’t immediately deductible, but they can be depreciated over a seven-year schedule, giving you additional tax relief over time.

15% Depletion Allowance

Ongoing tax deduction on production income.

Once a well starts producing, investors are eligible for the 15% depletion allowance, which enables you to deduct 15% of the gross income from the well—year after year. This provides an ongoing tax benefit as long as the well remains productive.

Offset Active Income (Not Just Passive)

Reduce taxes on wages, business income, and more.

Unlike most investments, oil and gas direct working interests are classified as active income. This means any losses can be used to offset other active income sources, such as salary, business income, or rental income—making this a strategic tool for high-income earners.

Deductible Lease Operating Expenses (LOEs)

Ongoing deductions for production-related costs.

After drilling, you can deduct operational expenses such as maintenance, transportation, and lease costs. These Lease Operating Expenses (LOEs) reduce taxable income during the life of the well.

Alternative Minimum Tax (AMT) Exemption

Maximize your deductions—even under AMT rules.

Many of the tax advantages available through oil and gas investing, including IDCs and the depletion allowance, are exempt from the Alternative Minimum Tax. This means high-net-worth individuals can still take full advantage of these benefits without hitting a tax ceiling.

Summary Of Tax Benefits

Tax Benefit

Intangible Drilling Costs (IDCs)

Tangible Drilling Costs (TDCs)

Depletion Allowance

Offset Active Income

Lease Operating Expenses (LOEs)

AMT Exemption

Details

Up to 80% deductible in year one

Depreciated over 7 years

15% annual deduction on gross income

Losses can reduce income tax on wages/business income

Fully deductible operational costs

IDCs and depletion exempt from AMT

Take Advantage of These Tax Benefits

Investing in domestic energy development doesn’t just offer revenue potential—it provides real, immediate tax advantages for qualified investors.

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