The marginal well credit just hit a record. Here’s how to claim it.
IRS Notice 2026-42 sets the §45I credit at $0.81 per Mcf for 2026 — the highest it has ever been, and worth up to about $5,300 per qualifying gas well. If you operate low-volume wells, this one was written for you.
Every summer, the IRS publishes a number that almost nobody reads. It lands in the Internal Revenue Bulletin without a press release, and it determines whether one of the only countercyclical tax credits in the oil patch pays anything at all.
This July, in Notice 2026-42, that number came in at $0.81 per thousand cubic feet (Mcf) of qualified natural gas — the highest the marginal well credit has ever been. It’s also the third year in a row the credit actually pays, after two straight years at zero.
If you operate stripper wells, the low-volume wells that keep producing long after everyone stops paying attention to them, this one is worth ten minutes. What follows is what the credit is, who qualifies, what it’s worth per well, and how to make sure your preparer doesn’t leave it on the table.
The short version
- The 2026 credit is $0.81 per Mcf of qualified natural gas, a record, set by IRS Notice 2026-42.
- It’s worth up to roughly $5,300 per well, per year, with no limit on the number of wells.
- Wells averaging 15 barrels of oil equivalent a day or less may qualify, and you must hold an operating interest.
- It’s claimed on Form 8904, a form most preparers have never had a reason to file.
- 2024 and 2025 also paid. If those years were missed, the money is still recoverable. For now.
1. What the marginal well credit actually is
Congress created the Section 45I marginal well credit in 2004 as a safety net for the country’s smallest producers. The design is deliberately countercyclical: the credit shrinks as the prior year’s average wellhead gas price rises, and it disappears entirely when prices are strong. When prices are weak, which is exactly when a 10-Mcf-a-day well is hardest to justify keeping on pump, the credit switches on.
On paper the credit covers both crude oil and natural gas from marginal wells. In practice, oil prices have kept the crude side phased out every single year since the credit was enacted. This has always been, for all practical purposes, a natural gas credit.
That design also explains why so few operators have it on their radar: for most of the credit’s life, the answer was $0. It paid little or nothing through 2019, and in 2022 and 2023, after gas spiked, it zeroed out again. The operators who built a Form 8904 habit in 2020 and 2021 got paid. Most everyone else forgot it existed.
2. Why 2026 is a record year
Each summer, the IRS runs the prior year’s average wellhead gas price through a formula Congress wrote in 2004 and publishes the result. Strong prices shrink the credit or kill it. Weak prices turn it on.
Wellhead gas was weak in 2025. So for 2026, the formula produced the largest credit in the provision’s history, and the third paying year in a row. The recent record, per Mcf of qualified gas:
| Tax year | Credit per Mcf |
|---|---|
| 2019 | $0.08 |
| 2020 | $0.66 |
| 2021 | $0.67 |
| 2022 | $0.00 |
| 2023 | $0.00 |
| 2024 | $0.77 |
| 2025 | $0.79 |
| 2026 | $0.81 |
We’ll spare you the arithmetic behind the number — it involves a reference price, an inflation factor, and a phase-out fraction only a tax practitioner could love. What matters is the pattern: the credit pays when wellhead gas is cheap, and it pays best in the years your wells earn the least. It also resets every year, and a strong 2026 at the wellhead could turn it back off for 2027. The window is open now.
If this credit got written off as “always zero” during the 2022–23 price spike, that assumption is now three years stale — and each of those years has been worth more than the last.
3. Does your well qualify?
The rough test: a well on a property averaging 15 barrels of oil equivalent per day or less, per well. For a gas well, that’s in the neighborhood of 90 Mcf a day. A second test covers wells up to 25 BOE a day that produce almost entirely water. And you must hold an operating interest — royalty owners are out.
Simple enough on paper. In practice, the test runs at the property level, averaged across the calendar year, with wrinkles around well counts, shared interests, and what counts toward the average. We’ve seen operators assume they don’t qualify when their per-well average actually clears the bar — and the reverse. The wells you stopped watching are usually the ones that qualify.
Don’t eyeball it. Have the average run properly against your 2025 production data — it’s an hour of work that can be worth six figures, and we’re happy to be the ones who run it.
4. What it’s worth
For 2026, the credit tops out at roughly $5,300 per well. There is no limit on the number of wells:
- 25 qualifying wells: roughly $133,000
- 100 qualifying wells: roughly $532,000
Every year the credit is on. And it’s a credit, not a deduction, so it comes off your tax bill dollar for dollar. There are caps, prorations, and usage limits underneath those numbers — the kind of detail worth getting right before you count on the money, and before you decide what a package of legacy conventional wells is actually worth. At these rates, the credit belongs in the acquisition model too.
Get a real estimate across your qualifying well count now, not at filing time. If it’s material, it changes your quarterly estimates — and possibly which marginal properties are worth keeping, or buying.
5. Claiming it — and the years you already missed
The credit is claimed on Form 8904, a form many preparers have never filed for the simple reason that for most of its life there was nothing to claim. The claim itself lives or dies on the production file behind it — that’s where we’ve seen credits survive scrutiny, and where they fall apart.
Two more things worth knowing, and both surprise people:
- Unused credit carries back five years and forward twenty. Most credits get one year back. This one was built for producers who have losses in exactly the years it pays.
- 2024 and 2025 both paid — $0.77 and $0.79 per Mcf. If nobody filed Form 8904 for you in those years, that money is still recoverable on amended returns. For a while.
Ask one question of your 2024 and 2025 files: “Did we file Form 8904?” If the answer is no and you operate low-volume gas wells, call us before the amendment window closes. That conversation has a deadline.
Quick answers
$0.81 per Mcf of qualified natural gas production, per IRS Notice 2026-42 — the highest amount since the credit was created. Per well, that’s up to about $5,300 for the year.
Broadly, a well on a property averaging 15 barrels of oil equivalent a day or less per well, or one producing up to 25 BOE a day that is at least 95% water. The averaging rules have wrinkles — worth confirming against your actual production data.
Taxpayers holding an operating interest in the well during production. Royalty interests don’t qualify. It’s claimed on Form 8904.
Yes. Unlike most general business credits, unused marginal well credit carries back five years and forward twenty — and 2024 and 2025 credits can still be claimed on amended returns.
The bottom line
The marginal well credit pays you for production you were already going to run. No new investment, no waiting period. It asks only that you know it exists, hold the right kind of interest, and have the production data to back the claim — and that last part is where the money is won or lost.
At RSK, energy tax isn’t a seasonal exercise. We work with operators, mineral owners, and PE-backed producers across Texas year-round, and the marginal well credit is one line in a larger conversation about depletion, IDCs, equipment depreciation, and how a package of legacy wells should be structured in the first place. If you want to know what §45I is worth across your well count — for 2026, and for the two years you may have already left behind — that’s a thirty-minute phone call. Worth making before year-end planning, not after.
This article is general information, not tax advice, and reflects federal guidance as of July 2026. Credit amounts are set annually by the IRS and change each year. Whether a particular well qualifies depends on your specific production data and ownership structure — talk to a qualified advisor before acting. Sources: IRS Notice 2026-42, 2026-29 I.R.B. 41; IRC §45I; IRC §39(a)(3); IRS Form 8904 and instructions.