Does Working Interest Work for Real Estate Investors?
by Eckard Enterprises
If you’re looking to expand beyond real estate, there's another investment vehicle that's capturing the attention of investors like yourself – one that offers immediate tax benefits that can dwarf even the most aggressive real estate depreciation schedules.
Working interest in oil and gas operations isn'tjust about energy speculation. It's about creating a powerful tax strategy that complements your real estate portfolio while opening doors to an entirely different asset class with compelling fundamentals.
Why Does Working Interest Work for Real Estate Investors?
The parallels between real estate and working interest are striking. Both involve tangible assets, both offer tax advantages, and both can generate ongoing income streams. However, working interest provides several unique benefits that even the most tax-efficient real estate strategies cannot match.
Immediate Tax Relief:
While real estate depreciation spreads benefits over decades, working interest offers immediate intangible drilling cost (IDC) deductions that can offset 70-100% of your investment in the first year.
Portfolio Diversification Beyond Property Type:
While real estate responds to local economic conditions, interest rates, and demographic trends, oil and gas markets operate on global supply and demand dynamics. This diversification can provide stability during real estate market downturns and offer growth opportunities during energy sector upswings.
Active Investment Status and Tax Flexibility:
Unlike passive real estate investments, working interest qualifies as an active investment under IRS guidelines. This classification unlocks additional tax strategies and provides greater flexibility in how you structure your overall investment approach.
Substantial Tax Advantages: A Closer Look
Perhaps the most significant benefit comes from the tax treatment of working interests. The IRS offers generous deductions designed to encourage domestic energy production. Intangible drilling costs—which typically represent 60-80% of well costs—can often be deducted in the first year. Additionally, tangible equipment costs can be depreciated over seven years. The depletion allowance permits investors to deduct up to 15% of gross income from the property, acknowledging resource depletion. These provisions can substantially reduce taxable income, making working interests particularly attractive for high-income individuals seeking tax-efficient investments.
How Do You Get Involved?
Eckard understands the perspective of real estate investors. Many of our clients come from a background in real estate and have enjoyed the benefits of diversifying into an asset class that compliments their existing investments. The tax benefits can free up capital for more aggressive acquisitions, while the diversificationprovides downside protection for their concentrated real estate holdings.
With a full team of geologists, engineers, landmen, and other oil & gas professionals, we have a fully integrated team that is dedicated to securing the right energy assets for our investing partners. Speak with one of our experts today to learn why real estate aficionados are adding energy to their portfolios.
Connect With Our Team:https://eckardenterprises.com/azreia/