IRS Announces 2021 Marginal Well Credit

There is an exciting opportunity for natural gas well owners who held an operating interest in a qualified marginal well during 2021.

The IRS finalized and released the natural gas reference price used to compute the Marginal Well Credit for the 2021 tax year with the issuance of Notice 2022-18 on May 2, 2022. Eligible taxpayers can receive a credit of $0.67 per qualified MCF produced during the year.

To qualify for the Marginal Well Credit, a well must be a marginally producing domestic well under the percentage depletion rules, which is 15 barrels of oil equivalent per day (90 mcf or less per day). This presents a significant tax savings strategy for owners of qualified stripper wells because the potential credit could be as much as $4,401.90 in tax savings per qualified well. Note, there is no limit on the number of qualified wells any one taxpayer can use to determine their credit.

The marginal well credit is part of the general business credit and cannot offset tax liabilities generated from the alternative minimum tax, and any unused credit can be carried back five years and carried forward 20 years.

If you think you could benefit from the credit or would like to discuss the 2021 Marginal Well Credit, please contact a Schneider Downs tax advisor.

You’ve heard our thoughts… We’d like to hear yours

The Schneider Downs Our Thoughts On blog exists to create a dialogue on issues that are important to organizations and individuals. While we enjoy sharing our ideas and insights, we’re especially interested in what you may have to say. If you have a question or a comment about this article – or any article from the Our Thoughts On blog – we hope you’ll share it with us. After all, a dialogue is an exchange of ideas, and we’d like to hear from you. Email us at [email protected].

Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.

© 2022 Schneider Downs. All rights-reserved. All content on this site is property of Schneider Downs unless otherwise noted and should not be used without written permission.

our thoughts on
Bring Extra Water to Put Out That EV Fire
EVs Are Zero Emissions? Not!
Automobile, Tax BY Steven Barber
The FTC Safeguards Rules Are Extended to June 9, 2023
401(k) Plans, Tax BY Luke Dovell
Want More Money? Start Investing Early
IRS Gave the Gift of Higher Estate and Gift Tax Limits for 2023
Automobile, Tax BY Michael Conroy
Electric Vehicle Tax Credit
Register to receive our weekly newsletter with our most recent columns and insights.
Have a question? Ask us!

We’d love to hear from you. Drop us a note, and we’ll respond to you as quickly as possible.

Ask us
contact us

This site uses cookies to ensure that we give you the best user experience. Cookies assist in navigation, analyzing traffic and in our marketing efforts as described in our Privacy Policy.