275. The Revolutionary World of Oil & Gas Investing with Troy Eckard
Tax Smart Real Estate Investors Podcast
Tax Deductions and Investment Strategies in Oil & Gas Industry
Investing in oil drilling can provide substantial tax benefits in the form of deductions. By investing in drilling, a significant portion of the investment can be deducted in the first year itself, reducing taxable income. This deduction includes drilling costs, equipment, and lease old costs. Typically, 60 to 75% of these costs are deductible, with the remaining portion spread out over years for depreciation and amortization. Drilling investments can be seen as a tax deferment strategy, allowing individuals to move tax liabilities to future years while benefiting from depletion allowances. This approach ensures a lower taxable income and substantial tax deductions upfront. While drilling investments aim for 30 to 40% cash on cash return, mineral investments offer around 15% cash on cash return due to their tax-free component from depletion allowances.
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