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Definition · Energy

Intangible Drilling Costs

Non-salvageable drilling costs such as labor and drilling mud, generally deductible in the year incurred by working interest owners.

Nashional Investments · Updated October 2026

Educational definition only, not investment, tax or legal advice.

In practice

Energy programs can produce large first-year deductions, but they are speculative and illiquid, and the tax result depends on how the interest is held. The term Intangible Drilling Costs is part of how we evaluate an oil and gas program, alongside the operator's history, the well costs and how the deduction fits the rest of your tax picture. We coordinate the details with your CPA.

Questions

Common questions.

What does the term Intangible Drilling Costs mean?
Non-salvageable drilling costs such as labor and drilling mud, generally deductible in the year incurred by working interest owners.
Why does Intangible Drilling Costs matter for investors?
Energy programs can produce large first-year deductions, but they are speculative and illiquid, and the tax result depends on how the interest is held. The term Intangible Drilling Costs is part of how we evaluate an oil and gas program, alongside the operator's history, the well costs and how the deduction fits the rest of your tax picture.
Related terms
Tangible Drilling CostsWorking InterestRoyalty InterestPercentage Depletion

All terms

Where it applies

See how this fits into a real plan on our Energy page.

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