This post is brought to you in partnership with Eckard Enterprises.
Disclaimer: This article is for educational purposes only and does not constitute tax, legal, or investment advice. Oil and gas investments carry risks and may not be suitable for all investors. Always consult a licensed tax professional or financial advisor before making investment decisions.
“In this world, nothing can be said to be certain, except death and taxes.” – Benjamin Franklin
And if you’re a doctor, chances are both hit your inbox by Tuesday.
If you’re a high-income physician, you know the sting of paying six figures in taxes every single year, even when you’re doing everything right. You’re likely maxing out your 401(k) or 403(b), funding a backdoor Roth IRA, and maybe investing in real estate for depreciation benefits. If you’re ahead of the curve, you’ve worked with your CPA on cost segregation or accelerated depreciation. Those are all great strategies.
But at a certain point, you hit a wall. There’s only so much you can defer, only so many buckets to fill. And once your income enters the multiple six or seven figures, traditional strategies begin to lose impact.
What if there was a lesser-known strategy that offers real-time deductions against your active income, including W-2 income, in the same year you invest?
That’s where working interest ownership in oil and gas comes in.
What Is Working Interest Ownership?
Working interest ownership is a tax-advantaged way to participate directly in domestic oil and gas production.
Unlike owning mineral rights, which is typically passive, working interest ownership means you’re actively investing capital to fund the development of new drilling projects, usually at the early stage.
Because you’re directly helping to fuel domestic energy production, the IRS provides significant incentives under Section 263(c) of the tax code.
You may be able to deduct up to 100% of your investment in working interest projects, including against W-2 income, in the same year the investment is made.
This is made possible by a provision known as Intangible Drilling Costs (IDCs). These are expenses like labor, site prep, and equipment rental. They are generally 100% deductible in the year incurred, assuming certain conditions are met.
To deduct these losses against ordinary income, including W-2 income, the investor must materially participate in the activity as defined under IRS Section 469. Otherwise, the investment may be treated as passive, and losses can only offset passive income.
For example, if you earn $1 million in W-2 income and invest $200,000 into a qualified working interest program and materially participate, you could potentially deduct that full $200,000 in the same year. That reduces your taxable income to $800,000.
That’s not just deferral. That’s a real-time deduction.
“The IRS created these incentives to reward investors who help build America’s energy infrastructure,” says Troy Eckard, CEO of Eckard Enterprises. “You’re fueling domestic production, and the tax code acknowledges that.”
These rules have been in place for decades and serve a clear national interest. But they remain largely underutilized by high-income professionals.
Isn’t Oil & Gas Risky? (Not the Way It Used to Be)
Let’s be honest. When you hear “oil investing,” you probably picture wildcat wells in the middle of nowhere and fingers crossed for a gusher.
In the past, that wasn’t far from reality. But the game has changed dramatically.
Thanks to innovations like 3D seismic mapping, horizontal drilling, and decades of production data, operators today can identify proven formations with remarkable accuracy. In some basins, success rates have climbed well above 90%.
“We used to hit four out of ten wells. Now, in the right areas, we’re nearly perfect. It’s not guessing anymore. It’s execution,” says Eckard.
The most reputable firms now take an institutional approach to investing, with in-house teams covering geology, engineering, land acquisition, and operations. That means more transparency, oversight, and alignment with investor goals.
Still, oil and gas investing involves risk. These projects are not guaranteed, and returns depend on variables like commodity prices, production costs, and operator execution.
Key Risk Considerations:
- Capital is illiquid. These are long-term investments.
- The investment may be lost if the well fails or underperforms.
- Deductions may be subject to recapture if the interest is sold or fails early.
- High-income earners may be affected by the Alternative Minimum Tax (AMT), which could limit the tax benefit of IDCs.
That said, for accredited investors who understand the model and choose the right partners, working interests may offer both tax advantages and monthly income.
From Tax Savings to Monthly Cash Flow
Here’s what most people don’t realize. The deductions are just the beginning.
Once the well is drilled and producing, investors begin to receive monthly distributions based on their ownership interest and the sale of extracted oil or gas.
It’s not a stock dividend. It’s actual revenue from a physical commodity being pulled out of the ground.
This income stream can last for years and, when structured correctly, can be one of the most tax-efficient cash flows available to physicians and high earners.
Typical Timeline:
- Short-term: Immediate year-one tax deduction from IDCs
- Mid-term: Cash flow begins within months of production
- Long-term: Income continues monthly for the life of the well
In many successful projects, investors recover their capital within a few years, and cash flow continues well beyond that.
“The real goal isn’t just to reduce taxes,” says Eckard. “It’s to turn tax savings into real income-producing assets.”
Why It Makes Sense for Physicians
Physicians face a unique set of challenges:
- High income and high tax burden
- Limited time to manage side hustles
- Desire to diversify beyond Wall Street
- Long-term goals around flexibility and legacy
Working interest ownership can help address those issues.
With the right operator, the process is hands-off. You’re not managing a property or running a business. You’re contributing capital to a professionally managed energy project, and you may be rewarded through deductions and monthly income.
And because the investment is tied to energy production, not financial markets or real estate cycles, it can serve as a powerful diversification tool in your portfolio.
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Final Thoughts: Make Every Tax Dollar Count
Most people treat taxes like a sunk cost, just the price of earning a good income.
But the tax code is written to incentivize behavior that supports national priorities like domestic energy independence.
When you invest in a working interest project, you may receive a large upfront deduction if you materially participate. You can turn those savings into recurring monthly cash flow. And you help support the U.S. energy economy.
It’s not a loophole. It’s a built-in incentive. And most physicians aren’t using it.
As with any investment, execution matters. Partnering with an experienced and transparent operator is critical. That’s where firms like Eckard Enterprises specialize. They provide direct access to energy projects with full visibility and alignment.
Want to Learn More?
Check out PIMD Podcast Episode #282 WORKING INTERESTS IN OIL & GAS: CASH FLOW AND TAX BREAKS FOR PHYSICIANS FT. TROY ECKARD OF ECKARD ENTERPRISES
Final Disclaimers:
This article is provided for informational purposes only and does not constitute tax, legal, or investment advice. The examples used are hypothetical and do not represent the performance of any specific investment. All investments carry risk, including loss of principal. Oil and gas investments may not be suitable for all investors. Consult with a qualified CPA or licensed advisor before making any financial decision.
If you’re interested in more, subscribe to our newsletter for more content that will help you in and out of medicine. As always, make it happen!
Peter Kim, MD is the founder of Passive Income MD, the creator of Passive Real Estate Academy, and offers weekly education through his Monday podcast, the Passive Income MD Podcast. Join our community at the Passive Income Doc Facebook Group.
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