Why the Wealthy Use Oil & Gas Investments to Cut Six Figures Off Their Taxes

10 snips

Aug 20, 2025

Discover how oil and gas investments can slash tax bills while boosting cash flow. Uncover the secrets of IRS Code 263(c), which allows substantial upfront deductions. Learn why drilling funds are a smarter choice than traditional tax write-offs. Explore impressive return potentials from a $100,000 investment, yielding significant tax savings and cash flow over a decade. Finally, understand the strategic planning needed to navigate legal compliance and risk in these lucrative opportunities.

Ask episode

AI Snips

Chapters

Transcript

Episode notes

INSIGHT

Why The Permian Basin Matters

U.S. Energy focuses on vertically integrated drilling in the Permian Basin with major joint-venture partners.
They aggregate capital into developmental drilling to create predictable production and tax-structured investments.

ADVICE

Leverage IDCs For Large Upfront Deductions

Use IRS Code 263(c) to claim intangible drilling costs (IDCs) when you invest in a direct drilling partnership.
Expect roughly 85–90% of your cash investment to be deductible as ordinary income in year one for both federal and state taxes.

INSIGHT

Upfront Deductions Plus Long-Term Shelter

Tangible drilling costs depreciate while depletion allowances shelter production income over time.
The structure delivers a large immediate deduction plus ongoing tax-efficient cash flow from depreciation and depletion.

Get the Snipd Podcast app to discover more snips from this episode

Get the app

Send us a text

Most tax strategies give you either a write-off or long-term growth. Oil and gas gives you both. With IRS Code 263(c), you get massive upfront deductions and steady tax-advantaged cash flow.

In this episode, Mike and Nick from US Energy unpack how drilling funds work, the unique tax benefits they provide, and how to use them strategically in your business planning.

👉 Get the Free Tax Savings Starter Kit Built for Small Business Owners: https://www.taxsavingspodcast.com/starterkit

🚀 Book your free demo call today! Click here or visit: https://taxelm.com/demo/

Chapters:

(01:34) What Is US Energy and Their Focus
US Energy’s 45+ year history in oil and gas, working with partners like Exxon and Shell, and why the Permian Basin is the hottest U.S. play.

(04:01) The Tax Benefits of Drilling Funds
IRS Code 263(c) allows investors to deduct 85–90% of their investment upfront through intangible drilling costs.

(06:07) Tangible Costs and Depletion Allowances
Using depreciation and depletion to shelter future income from wells and create long-term tax efficiency.

(08:12) Why Oil and Gas Beats the “Buy a Truck” Strategy
Instead of wasting money on deductions you don’t need, oil and gas offers upfront write-offs and produces an appreciating income-generating asset.

(09:24) Sample Investment Return Breakdown
How a $100,000 investment could produce $45,000 in tax savings and cash flow returns of 1.5–2x over 10 years.

(13:06) Understanding Tax Risk
Audit concerns, excess business loss limitations, and AMT caps, plus how unused deductions can be carried forward.

(18:28) Investment Risks and Hedging Commodity Prices
The difference between exploratory, step-out, and developmental drilling, and how hedging protects against oil price drops.

(22:06) Oil and Gas for QBI Planning
How investments can lower AGI and re-open the Qualified Business Income deduction, creating stacked tax savings.

👉 Learn more about Oil and Gas Investing at US Energy: https://www.usenergyco.com

Podcast Host:

Mike Jesowshek, CPA – Founder and Host of Small Business Tax Savings Podcast
Join TaxElm: https://taxelm.com

🚀 Visit: https://www.TaxSavingsPodcast.com

🚀 Check Out TaxElm: https://taxelm.com/

🚀 Join our Free Facebook Group: https://www.facebook.com/groups/taxsavings/

🚀 YouTube: www.TaxSavingsTV.com

👋🏼 GET IN TOUCH
You can Tweet @MJesowshek with any feedback, ideas, or thoughts about the lessons you've learned from the episodes. We want to thank you personally for tuning in 🙏

🙏 LEAVE A REVIEW
If you enjoy the podcast, please leave a 5-star review on Apple Podcasts or Spotify—it helps more business owners find the show ⭐

🎙 ABOUT THE PODCAST
The Small Business Tax Savings Podcast is your go-to resource for cutting-edge tax strategies to help entrepreneurs legally slash their tax bills. Hosted by Mike Jesowshek, CPA, this show breaks down complex tax topics into clear, no-fluff insights so you can keep more of your hard-earned money.