The top rates arrive early and stack
Federal, Medicare and state taxes can all apply to the same marginal dollar of earned income.
Where direct oil and gas ownership may fit for physicians, attorneys and dentists, and what it asks of you.
Most financial content is written for people trying to earn more. Your challenge is usually different: what happens to income after it arrives, how much of it you keep, and how concentrated your financial life is in a single career.
Federal, Medicare and state taxes can all apply to the same marginal dollar of earned income.
Retirement and health accounts are often maxed early in the year. The rest lands in taxable accounts.
Your future earnings tie most of your wealth to one profession, often one practice.
Anything you own should be judged partly on the time it asks of you.
Before looking at any asset, it helps to know which of these describes you. The distinction shapes how the tax rules later on this page apply.
Your income arrives as wages with tax withheld at source. For planning purposes, wages have one important feature: under the excess business loss rules, they are not treated as business income. That means a large business deduction in a single year can only offset your wages up to an annual, inflation-adjusted threshold. Anything above it carries forward to future years as a net operating loss rather than disappearing.
This does not make direct ownership unsuitable. It means the size and timing of any deduction should be modeled against your actual numbers, not assumed.
Your income flows through a partnership or S corporation and is reported to you on a Schedule K-1. Because it already comes from a trade or business, it generally counts on the business income side of the excess business loss calculation, which can let more of a business deduction be used in the year it arises.
Firm and practice structures vary widely, including state-level pass-through entity tax elections. The interaction between your firm's reporting and any outside business activity is something your CPA should confirm rather than assume.
You likely pay yourself a salary plus distributions, and your practice competes for the same capital as everything else: equipment, expansion, associate buy-ins, a second location. For many owners, the practice itself is the highest-conviction use of capital available, and it deserves first claim.
Outside assets make sense once the practice is adequately capitalized and you want to reduce how much of your net worth depends on a single business in a single location.
No single asset does every job. A useful way to think about a balance sheet is to assign each part of it a purpose, then judge each asset only against that purpose. Select a layer to see what it does and what it gives up.
Layer widths are illustrative, not a recommended allocation. The right mix depends on your circumstances and should be set with your own advisers.
The money that has to be there no matter what happens in markets.
Oil and gas can enter a portfolio in several forms. They differ in what you own, what you pay for, what you can sell and which tax rules apply. Knowing the differences is the fastest way to evaluate any offer you receive.
| Attribute | Public energy stocks & fundsExchange-traded | Mineral & royalty interestsShare of revenue | Limited partnership programsPooled, sponsor-managed | Direct working interestHow Summit JVs are structured |
|---|---|---|---|---|
| What you hold | Shares in a company or fund that owns energy assets | A right to a share of production revenue, free of drilling and operating costs | Units in a partnership that holds interests on your behalf | A direct share of specific wells, their costs and their revenue |
| Your share of costs | None directly | None | Borne inside the program | Proportional to your interest, including overruns |
| Liquidity | Daily, on an exchange | Limited; usually a private sale | Limited; often none until the program winds down | Limited; generally held for several years |
| Tax attributes that reach you | Dividends and capital gains | Depletion on royalty income | Drilling deductions and depletion, generally usable only against similar income | Drilling deductions, depreciation and depletion, subject to the limits in Chapter 4 |
| Can deductions offset salary or practice income? | No | Not applicable | Generally no | Potentially, under the working-interest rule |
| Liability | Limited to what you put in | Limited | Limited for limited partners | Not limited in the same way; this is the tradeoff that enables the tax treatment |
| Your role | None | None | Limited partner with few decisions | JV member with governance rights and participation in material decisions |
| Eligibility | Open to anyone | Varies | Often limited to accredited individuals | Accredited individuals, verified before any commitment |
General characteristics only. Individual programs and offerings vary, and specific terms are set out in each offering's documents.
The ownership share that carries the right to develop and produce a property, and the obligation to pay a proportional share of the costs of doing so. Working-interest owners receive their share of revenue after royalties are paid, and they bear their share of the expenses and the outcomes.
A share of production revenue, usually retained by the mineral owner, that is paid before costs and carries no obligation to fund drilling or operations. Simpler and lower in cost exposure, but royalty owners have no say in development and do not receive drilling-related deductions.
Tax treatment is often why professionals first hear about oil and gas. It is also where most misunderstandings start. Here is how the core rules work, followed by the limits that matter most at your income level.
Labor, fuel and drilling services can be deducted in the year they are incurred. On a new well, they are typically a large share of the cost.
Casing, wellheads and tanks are capitalized and depreciated over time. Accelerated depreciation may apply.
Once a well produces, qualifying owners may deduct 15% of gross income from the property each year.
Working interests held without limited liability are exempt from the usual loss limits, so deductions may offset salary or practice income.
These are the rules most often left out of oil and gas marketing, and the ones most relevant to high earners. Each is a reason to have your CPA model a specific project against your actual numbers.
Caps how much business loss can offset wages each year. The excess carries forward.
Drilling costs can be an AMT preference item, depending on your wider tax picture.
Some deductions are taxed back as ordinary income when an interest is sold.
Not every state follows the federal treatment.
Inside an IRA the deductions are largely wasted and can trigger unrelated business income tax.
The project should still make sense if the tax treatment became less favorable.
Summit focuses on redeveloping proven fields, which can combine new drilling, work on existing wells and acquisitions of producing assets. Select a project type to see which attributes typically matter most. This is a qualitative guide, not a projection.
Most spending on a new well is drilling-related.
Casing, wellheads and surface equipment are capitalized.
Begins only after the well produces.
Revenue waits for drilling and completion.
A single Summit project may combine all three. For any specific project, ask for the expected split of costs between drilling, equipment and acquisition, and have your CPA apply it to your own situation.
Direct ownership means sharing in the operational risk of a real business. These considerations deserve as much attention as the tax treatment.
A well can perform as planned and still earn less if prices fall.
Reserve estimates are engineering judgments, not certainties.
Owners pay their share of costs, including overruns and repairs.
There is no public market. Plan for capital to stay committed for years.
The tax treatment depends on liability not being limited. Review it with your attorney.
Deductions can be limited, recaptured or changed by new legislation.
One project or operator concentrates your exposure. Sponsor quality matters.
Evolving regulation can affect costs and timelines.
Guides, sessions and articles chosen for how professionals are paid and taxed, in roughly the order most people find them useful.
The tax mechanics from Chapter 4 in depth, with scenarios written for salaried and practice-owning physicians.
Ten questions to put to any operator, in a printable format with space to record their answers.
A one-page brief to share with your tax adviser: your income type, the rules to check and the numbers to request. [In production]
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A plain-language walkthrough of working interests, the JV structure, the Buy Right, Manage Right, Exit Right framework, and what to ask before committing. Live Q&A.
How the excess business loss limit, AMT and state rules affect salaried and partner-level professionals differently. CPAs are welcome to attend.
The questions to put to any operator, with what good and weak answers tend to look like. [Replay placeholder]
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Costs, control, liability and tax attributes compared, with examples.
9 min readTaxWhy W-2 income is treated differently, and what a carryforward really means.
[Read time]Portfolio contextHow human capital concentration should shape the rest of a balance sheet.
[Read time]Due diligenceTen questions, what good answers sound like, and red flags to watch for.
[Read time]TaxWhy project type determines the deduction, and what to ask for.
[Read time]Risk & liquidityHow to size committed capital against the rest of your plans.
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Short, direct answers. Where the answer depends on your situation, we say so.
This website is provided by Summit Ventures for general informational and educational purposes only. It does not constitute an offer to sell, or a solicitation of an offer to buy, any security or interest, and no such offer or solicitation will be made except through definitive offering documents provided directly to verified accredited participants.
Participation in a Summit Ventures joint venture is limited to individuals and entities that qualify as accredited under Rule 501 of Regulation D, and Summit Ventures takes reasonable steps to verify that status before any commitment is finalized, consistent with Rule 506(c) of Regulation D.
Direct working-interest participation in oil and gas development involves risk, including commodity price volatility, operational and geological risk, illiquidity, and the potential loss of some or all committed capital. Past performance of any Summit Ventures program, and the experiences described by any individual participant, are not indicative of future results and should not be viewed as typical or guaranteed.
Tax information referenced on this website is general in nature and reflects tax law believed current as of publication. It has not been prepared for any specific individual or transaction and is not a substitute for advice from independent, qualified tax and legal counsel.
Statements from program participants reflect their individual experience and are not paid testimonials unless otherwise disclosed. Individual results vary, and no statement here should be construed as a projection or promise of similar outcomes.