As an investor, you want to make the most out of every investment opportunity. “Are oil wells a good investment?” is a good question to ask. Here’s a look at some of the tax breaks you can enjoy when you make this a part of your investment strategy.
Intangible drilling costs
This is a type of tax deduction that allows investors to deduct all the income that incurred from intangible drilling costs. This is only possible, though, if the partnership investor has working interests in oil and gas companies. Don’t have a working interest? You can still qualify for this tax deduction if you’re a general partner. However, this could come with too many risks so it’s not an ideal solution, says the Conservative Income Investor.
The depletion allowance means investors can expect 15 percent of all their gross income to be non-taxable. This arrangement stands whether the ownership of the oil wells is done through general liability or a limited one. Done right, it could provide you with the cash infusion necessary to help you fund your other investments.
If you’re asking yourself “Are oil wells a good investment?” then you’ll need to be comfortable with the idea of acquiring long-term wealth. If you are, then this is a good option to consider. IDC credits make it possible to raise your ownership of profits by thousands over the long-term.
You can also invest in projects that ask little more than 1,000 for capital. Pick an investment platform that allows you to take part in projects and own a little piece of an oil well without exposing your finances to greater risks.
The best thing about oil and gas investments is that these commodities are finite. They’re non-renewable and therefore subject to growing demand – making them a solid investment opportunity.