Many professionals working in oil & gas generate two types of income – Active and Passive. Active income is classified as what you personally are responsible for doing – salary, commissions or sales of goods or services. Passive income mostly comes from investments that you are not directly responsible for. Royalties and rent would be two R’s of passive income.
When tax time comes, we add up how much we make, and we add all the expenses we can find to off-set that income.
The problem for many high-income individuals is that active income deductions only apply to active income, and passive deductions only apply to passive income. This often leaves money on the table, with deductions that can’t be used.
Thanks to the Tax Reform Act of 1986, you can use the Intangible Drilling Cost (IDC) deduction, normally considered passive, against active income. This creates a tremendous tax incentive for high earning investors to not only invest in America’s future, but to save considerably on their taxes.
Our latest infographic summarizes these opportunities below:[Click here for larger graphic]