Are you familiar with intangible drilling costs and how they impact your business?
Intangible drilling costs (IDCs) are the expenses you incur that aren't (and don't produce) a physical asset for your business. These can include costs that went into preparing the site prior to the installation of drilling equipment, as well as other things that have no salvage value after they are spent.
The purpose of the IDC tax deduction is to allow producers to quickly recover these costs and reinvest them. This deduction has been around for over 100 years, and it helps oil and gas businesses to continue exploring when a well is unsuccessful. IDCs can be deducted that year, or spread over 5 years' time. Retail businesses, such as gas stations, must amortize 30% of IDCs over 5 years. They have the option of deducting the remaining 70% that same year, or spreading it over 5 years.
Contact us today and one of our knowledgeable CPAs can answer any questions you have about IDCs, or anything else pertaining to your business.
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