On June 30, the IRS released the figures needed to calculate the Marginal Well Tax Credit (MWC) for tax year 2025.
Using a natural gas reference price of $1.64 per mcf and an inflation adjustment factor of 1.5821, the result is a credit of $0.79 per eligible mcf of production, the highest amount in the credit’s history.
The MWC was enacted to help domestic producers keep low-production (or “marginal”) wells in service, especially when natural gas prices are low. Marginal wells, which often operate on thin profit margins, are an important part of U.S. energy supply and local economies. The credit serves as an incentive to maintain production rather than shut in wells when prices dip.
Historically, the credit amount has varied each year based on the IRS-determined reference price and inflation adjustments. In recent years, the credit was $0.77 for 2024, and $0 in both 2022 and 2023, when higher natural gas prices meant the credit phased out entirely. The new 2025 credit of $0.79 per mcf marks a record high, providing extra support to operators during a period of relatively low gas prices.
For operators of qualified marginal wells, the 2025 credit could provide meaningful tax relief and help offset operating costs. As always, it’s important to review eligibility requirements carefully and consult with a tax advisor to ensure proper calculation and use of the credit.
If you think you could benefit from the credit or would like to discuss the 2025 MWC, please contact a Schneider Downs tax advisor.
