BP (NYSE:BP) Helped by Lower Taxes from Cleanup Costs

Something many people don't think about is the lower taxes BP (NYSE:BP) will enjoy from paying out the cleanup costs related to the Gulf oil spill.

Although it will be attacked by some, in a sense this is good news, as BP needs to survive, and even thrive, if they're going to be able to take care of their responsibilities in the matter.

So the $20 billion escrow fund will probably be a tax strategy for the oil giant over the next four years, as they pay out billions throughout the next several years to claimants.

This will be true in the U.S. and in Britain as well.

Depending on who you're listening to, the cleanup costs of BP, say if they were $60 billion, would result in about $20 billion in tax deductions over time, if you assume the 33 percent tax rate they paid out in 2009.

In the U.S. and focusing on the escrow fund, BP won't be able to take deductions until people are actually compensated. In other words, if they pay about $5 billion a year into it, they won't necessarily get tax deductions on that. If $3.5 billion were paid out for the tax year, that is what they would be able to take deductions on, not the entire amount.

What will raise a few eyebrows is the fact it is those receiving the money from BP who will end up paying taxes, as they're not exempt, as the government will consider it income, whether it's for a business or an individual.

That means money BP pays out will benefit them from a tax perspective, and the government gets a lot of that loss back from taxing the businesses and individuals receiving it.