Tax insight

Anticipated marginal well credit on 2025 tax returns

Insight
5 minute read
July 29, 2025

What happened?

The IRS in June released Internal Revenue Bulletin (IRB) 2025-27 (including Notice 2025-34) announcing the reference price for natural gas and the associated credit to be applied to the 2025 tax year. The IRS releases these annual notices announcing the reference price for natural gas and associated tax credit per 1,000 cubic feet (mcf) of natural gas. These amounts apply for taxpayers wishing to claim the marginal well credit (MWC) on their tax returns. The MWC is a nonrefundable general business credit that may be carried forward if not used in the current period.

The annual notice also provides the inflation adjustment factor (IAF) to be used to calculate the phaseout limit when determining the MWC. Over the past few years, the MWC has been available only for natural gas producing properties since the credit currently is phased out and not available for oil.

Why is it relevant?

Section 45I and IRB 2025-57 outline the steps for determining the estimated reference price and MWC for the 2024 calendar year. Due to the natural gas price decline in calendar year 2024, the MWC is available at a maximum credit of $0.79 per mcf for 2025 tax returns.

Note: Taxpayers were eligible to claim the MWC associated with natural gas production on their tax returns for the 2024 calendar year due to the reference price published in IRB 2024-52 stating that the credit was available at $0.77 per mcf. Also, it should be noted that no MWC for oil has been available since its enactment.

Action to consider

Taxpayers should consider and properly account for other important components of and qualifications to the MWC when calculating the credit.