The best tax advantage you get from oil and gas investing is a lower tax bill in a shorter amount of time. You can legally deduct up to 80% of your investment against your income in the year you make the investment—and up to 100% of it in just five years. I’ll go into more detail in a little bit.
Real estate has the reputation as the investment with the best tax advantages. And compared to most other investments, that’s true. However, it takes 27.5 years to get the full tax benefit after you buy a property. That’s because the IRS only allows straight-line depreciation expense every year. That’s the purchase price divided by 27.5 years. The IRS won’t allow multiple years depreciation in one.