Tax Benefits Attracting More Accredited Investors to Oil and Gas Investment Opportunities
Tax Benefits Attracting More Accredited Investors to Oil and Gas Investment Opportunities
(PRWEB) August 20, 2011
“The avoidance of taxes is the only intellectual pursuit that still carries any reward,” said John Maynard Keynes. Oil and gas investment may not help investors avoid paying taxes, but InvestmentOptions.Net asserts that a number of alternative investment strategies in oil and gas can certainly help sophisticated investors minimize the tax burden they carry. The government is aware that it is in the economy’s best interest to encourage domestic drilling, both to stimulate the economy as well as to reduce reliance on foreign energy supplies. Therefore, a large number of tax benefits have been created in order to incentivize highly qualified investors to consider domestic oil and gas investing.
The tax incentives available are numerous. Many investors are aware of the most significant tax benefits, says InvestmentOptions.Net, such as the deductions allowed for the exploration, drilling, and development of oil and gas wells. Intangible Drilling Costs (IDCs) are the intangible expenditures of drilling, including labor, chemicals, materials, and other similar expenses. IDCs are responsible for more than half of the cost of a well, and these costs are 100% deductible during the first year of drilling. Drilling equipment, also known as Tangible Drilling Costs (TDCs), can be depreciated over a period of seven years.
However, what many investors do not always consider are the legal, sales, and accounting costs, which remain tax deductible through the depletion of the well. Investors that are considering a direct investment in oil and gas may be concerned that their taxes would rise as they would not be participating in an “active” activity such as stocks and salaries. However the tax code associated with direct investment in oil and gas explicitly states that an oil well is indeed an “active” activity rather than a “passive” activity and receives the same deductions as other investment opportunities. Wealthy investors can use this tax benefit to their advantage, deducting the costs associated with the investment against other forms of income, such as salaries and investment gains.
The generous tax benefits are unique to oil and gas investments. Wealthy investors searching for tax benefits will not discover a more incentive opportunity. Oil and gas investments have the capacity to not only reduce tax burden but increase income.
InvestmentOptions.Net is dedicated to informing investors of the considerable advantages available when considering alternative oil and gas investments while still educating investors about the precautions they must take to minimize the significant risks involved.
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