Two Tax Deductions For Texas Oil Investing That You May Want to Know
Texas oil investing is most likely the most popular investment method, thanks to motivating waivers on taxes offered by the government.
It was in an effort to promote private investors that the government chose to provide distinctive forms of tax reductions for the Texas oil investor.
1: Active Vs Passive Income
The Tax Reform Act, 1986, introduced the notion of passive and active income to the Tax code. The act prohibits, offsets loss from any passive activity against incomes from an active business.
Best of all, the act obviously states that an oil well or natural gas well is not a passive activity. It goes without saying that, this results in appealing offers on tax.
2: Tax Exemption For Small Producers
In 1990, the reformed Tax Act brought numerous special benefits for small business establishments and individuals. One of the intriguing principles introduced was Percentage Depletion Allowance, a special clause brought to the law in an attempt to entice private investors to put extra money in oil and natural gas drilling.
This is especially beneficial for the small investor as the Act doesn’t cover large petroleum companies and petroleum retailers. Refineries that process crude oil of more than 50,000 barrels a day are also not eligible for the exemption.
For the small investor, there is 15% tax-free profit on their gross income and this is a considerable amount that you can expect only from Texas oil investing.
These are the key two tax exemptions offered by the United States government to encourage individual participation in the oil and natural gas industry.
The results of these laws were extraordinary, resulting in active participation from small investors; in both oil and natural gas drilling. It made Texas oil investing one of the most desired investments in the United States.