The drilling deduction, explained

How the drilling deduction works.

A rule the tax code has carried since 1913, and why W-2 wages count.

Takes 15 seconds. No obligation.

The rule

Drilling costs come off ordinary income. They have since 1913.

Intangible drilling costs are what it takes to drill and prepare a well for production: the work and services that leave nothing behind with a resale value. The tax code has let them be deducted against ordinary income since 1913.

They are most of the bill. Roughly 60 to 80 percent of total drilling costs are intangible, which is why the deduction is large relative to what goes in.

It is not a loophole or a new program. It is one of the oldest rules in the code.

Active income

Most write-offs stop at passive income. This one doesn't.

Most write-offs

Offset passive income only.

Salary and bonuses keep their full tax bill.

This deduction

Targets active income.

W-2 wages and capital gains count.

PetroVybe's offering targets a tax deduction against ordinary and active income, applied to W-2 wages and capital gains. That makes it relevant in exactly the years people usually have nothing to set against: a big salary year, a bonus year, the year a business sells.

The deduction is a target, not guaranteed, and depends on each investor's own tax situation. Confirm with your CPA.

The tax year

Three things decide which year it counts.

The money funds drilling.The deduction comes from intangible drilling costs, so it follows money that actually goes into a well program.
It goes in by December 31.The deduction counts in the tax year the investment is made. Money in on January 2 counts toward the next year.
It comes off ordinary income.W-2 wages and capital gains included. It arrives on a K-1, delivered no later than March.

The math

What $100,000 looks like.

$100,000 in~$70,000 target deduction

Roughly 70% of the investment, against ordinary income, in the year it goes in.

The minimum is $100,000. At that level the target is a deduction of roughly $70,000 in the year of the investment. What it is worth in tax depends on each investor's own bracket, which is a conversation for a CPA.

Target, not guaranteed. Not tax advice.

The calendar

The December 31 line.

NOVStill counts for 2026

DECStill counts for 2026

31Last day for 2026

JANCounts for 2027

There are fewer than two months left in 2026. A deduction meant for this year needs the money in before the year closes.

The asset

Where the money goes.

PetroVybe ONE is a Texas natural gas development, mostly dry gas and natural gas liquids, in the Gulf Coast Basin of South Texas.

The tank battery on site, South Texas — Tank battery, on site

A wellhead on site, South Texas — A wellhead, on site

400producing wells in South Texas

58,000leased acres, roughly

Mar 2026third-party reserve report

Questions

Questions people ask.

Do W-2 wages really count?

The offering targets a deduction against ordinary and active income, and PetroVybe's materials apply it to W-2 wages and capital gains. Whether it applies to a specific return is a question for a CPA.

Is this a loophole?

No. Intangible drilling costs have been deductible against ordinary income since 1913.

When does the paperwork arrive?

Partners receive a K-1 no later than March of the following tax year.

What is the minimum?

$100,000. Accredited investors only, under Reg D 506(c).

How long is the money in?

The target case runs ten years of cash distributions. It is not liquid.

What if a well comes up dry?

PetroVybe starts from about 400 producing wells, not a single new hole, and the reserves were assessed in a third-party report in March 2026. Drilling still carries real risk, including loss of principal.