Greetings,

You may elect to deduct all, or a portion, of your share of intangible drilling costs currently or to capitalize all, or a portion, of the intangible drilling costs and amortize them ratably over a 60-month period beginning with the month or months the costs were paid or incurred.

You elect to deduct Intangible drilling costs as a current business expense by taking the deduction on your income tax return for the first tax year you have eligible costs. No formal statement is required. For oil and gas wells, your election is binding for the year it is made and for all later years.

If you file Schedule C (Form 1040) for the activity, enter these costs under "Other expenses."

If your interest is that of a limited partner, report your deduction or amortization amount of intangible drilling costs on a separate line in Part II of Schedule E to Form 1040, netting the deduction for intangible drilling costs which you elect to deduct or amortize against your income from the partnership.

I hope this helps for deducting intangible drilling costs.

Hello again,

If you are a partner or shareholder in an S corporation you will receive Schedule K-1 and use Schedule E for that income. You will report your deduction or amortization amount of intangible drilling costs on a separate line in Part II of Schedule E to Form 1040.

I hope this helps to clarify.