As a tax professional who works closely with contractors in the oil and gas industry, I’ve noticed a recurring theme: many hardworking individuals miss out on valuable tax deductions simply because they don’t know what to track or how to document their expenses. The nature of this industry—frequent travel, specialized equipment, remote job sites, and high-risk work—creates unique opportunities for tax savings. However, without proper record-keeping, these deductions can slip through the cracks.

In this blog, I’ll focus on the top four tax deductions  that oil and gas contractors often forget to track. By paying attention to these areas, you can maximize your refund and keep more of your hard-earned money.

1. Travel Expenses: Mileage and Per Diems

Travel is a significant part of the job for most oil and gas contractors. Whether you’re driving to a remote drilling site or flying across the country for a project, these expenses can add up quickly. Unfortunately, many contractors fail to track their travel-related costs, leaving money on the table.

What You Can Deduct:

• Mileage: If you use your personal vehicle for work-related travel, you can deduct mileage at the IRS standard rate (65.5 cents per mile in 2023). This includes driving to job sites, equipment rentals, or meetings with clients.  
• Per Diems: When you’re away from home for work, you can claim per diem allowances for meals, lodging, and incidental expenses. The IRS provides standard rates for different locations, so you don’t need to save every single receipt.

Common Mistakes:

• Not keeping a mileage log.  
• Forgetting to document the purpose of each trip.  
• Overlooking per diem allowances when traveling for extended periods.

Pro Tip: Use a mileage tracking app or a notebook to record your travel details throughout the year. This will save you time and ensure you don’t miss out on these valuable deductions.

2. Tools and Equipment: Depreciation and Repairs

Oil and gas contractors rely heavily on specialized tools and equipment, from wrenches and safety gear to heavy machinery like compressors and drills. Many contractors forget that they can deduct the cost of these items, either through depreciation or as a direct expense.

What You Can Deduct:

Section 179 Deduction: This allows you to deduct the full cost of qualifying equipment in the year it’s purchased, rather than spreading the deduction over several years. For example, if you buy a new piece of machinery, you may be able to write off the entire cost in one year.  

Repairs and Maintenance: Routine maintenance and repairs on your equipment are also deductible. This includes everything from oil changes to replacement parts.

Common Mistakes:

• Not keeping receipts for equipment purchases or repairs.  
• Failing to track smaller tools and safety gear, which can add up over time.  
• Overlooking the Section 179 deduction and missing out on immediate tax savings.

Pro Tip: Create a dedicated folder (physical or digital) for all receipts related to tools and equipment. This will make it easier to track your expenses and claim the appropriate deductions.

3. Safety Gear and Uniforms: Protect Yourself and Your Wallet

Safety is paramount in the oil and gas industry, and the cost of safety gear and uniforms can be substantial. Many contractors don’t realize that these expenses are fully deductible, which means you can protect yourself on the job while also reducing your tax bill.

What You Can Deduct:

• Safety Gear: This includes hard hats, steel-toed boots, flame-resistant clothing, gloves, safety glasses, and other protective equipment required for your job.  
• Cleaning Costs: If you’re required to wear a uniform or specialized clothing, the cost of cleaning and maintaining these items is also deductible.

Common Mistakes:

• Not saving receipts for safety gear or uniforms.  
• Overlooking smaller items like gloves or safety glasses, which can add up over time.  
• Failing to track cleaning costs for uniforms or specialized clothing.

Pro Tip: Keep a separate folder for receipts related to safety gear and uniforms. This will help you stay organized and ensure you don’t miss out on these deductions.

4. Insurance Premiums: Protect Your Business and Your Bottom Line

Insurance is a necessary expense for oil and gas contractors, but many don’t realize that their premiums are deductible. Whether it’s general liability insurance, workers’ compensation, or health insurance, these costs can add up—but they can also save you money at tax time.

What You Can Deduct:

• General Liability Insurance: Premiums for policies that protect your business from claims of property damage or injury are fully deductible.  
• Workers’ Compensation: If you have employees, the cost of workers’ compensation insurance is also deductible.  
• Health Insurance: If you’re self-employed, you can deduct 100% of your health insurance premiums for yourself, your spouse, and your dependents.

Common Mistakes:

• Not keeping records of insurance premium payments.  
• Overlooking the self-employed health insurance deduction.  
• Failing to deduct premiums for specialized policies, such as equipment insurance.

Pro Tip: Review your insurance policies at the beginning of each year to ensure you’re adequately covered. Keep records of all premium payments, and consider working with a tax professional to maximize your deductions.

Final Thoughts

While there are many tax deductions available to oil and gas contractors, these four areas—travel expenses, tools and equipment, safety gear and uniforms, and insurance premiums—are the most commonly overlooked. By focusing on these key areas and keeping detailed records, you can significantly reduce your tax liability and keep more of your hard-earned money.

Remember, the key to maximizing your deductions is staying organized throughout the year. Use apps, folders, or notebooks to track your expenses, and don’t hesitate to consult with a tax professional if you’re unsure about what you can claim. With a little effort and attention to detail, you can make tax season a lot less stressful—and a lot more rewarding.