Why High Earners Still Rely on Oil & Gas Tax Benefits - and Why They’re Not Going Anywhere

Every year, headlines resurface about efforts to eliminate fossil fuel subsidies. And every year, those efforts quietly stall. Despite political pressure and environmental critique, the core tax incentives that benefit U.S. oil and gas investors remain in place — and they’re likely to stay that way.

For high-income earners, that’s not just a political story — it’s a powerful, legal way to reduce taxes and grow long-term wealth.

Why These Tax Benefits Exist

Many of the oil and gas tax incentives aren’t new. In fact, some are over 100 years old. Created in the Revenue Act of 1913, the intangible drilling cost (IDC) deduction lets investors write off up to 80% of drilling expenses in the first year. These include labor, surveying, and other non-equipment costs — even before a well produces oil.

Another benefit, the depletion allowance, lets investors deduct a portion of the revenue from a producing well as if the asset itself is being “used up.” While the deduction rate has changed over time, smaller investors can still claim up to 15% of gross revenue as a tax deduction.

Originally intended to encourage energy independence and offset drilling risk, these tax rules continue to offer major deductions — especially helpful for W2 earners who don’t have access to corporate tax shelters.

Why They Still Matter

The Biden administration has now tried four times to eliminate these benefits. Yet bipartisan resistance — including from energy-state Democrats — has blocked every attempt. Why?

Because U.S. oil and gas production is at an all-time high, supporting over 9 million jobs, and driving domestic energy security. Lawmakers are hesitant to pull the plug on a sector that delivers both jobs and global leverage — especially during geopolitical uncertainty and energy transition debates.

What This Means for High Earners

If you’re a high-income professional paying 37%+ in federal taxes, these incentives are not loopholes — they’re longstanding, legal advantages written into the tax code.

Oil and gas project investments can:

• Deliver massive first-year deductions
• Offset active or passive income, depending on structure
• Generate monthly cash flow
• Provide inflation-resistant real asset exposure
  

Even if the climate conversation continues, these tax structures are deeply embedded — and changing them would require a rare level of political consensus. As it stands, these are among the most powerful tools in the tax code for reducing taxable income.

Bottom Line

Call them subsidies, deductions, or incentives — these benefits exist for a reason, and they continue to be defended by lawmakers on both sides. For high earners looking to legally lower their tax bill while investing in real assets, U.S. oil and gas remains one of the most effective strategies on the table.

Fieldvest connects accredited investors to vetted, tax-advantaged U.S. energy projects.

Discover how much more of your income you can keep.