Tax Breaks for Independent Oil and Gas Producers
Independent oil & gas producers, as well as individual investors in oil & gas partnerships, are allowed a percentage deduction for depletion by the Internal Revenue Service. Independent producers and investors who produce or own up to 1000 barrels of oil per day or 6 million cubic feet of gas per day, and related royalty, and overriding interest owners are allowed to deduct 15% of some expenses from gross income for oil & gas, limited to 50% of net income. Expenses involved with acquiring mineral rights, exploration for oil & gas, developmental costs (e.g. drilling) and capital costs are deductible.
Alternate Minimum Tax
The Internal Revenue Service allows independent oil & gas producers to deduct expenses from their respective share of each well’s intangible drilling costs and equipment depreciation to reduce their alternative minimum taxable income by up to 40%.