IRS Instruction 8864 – In the evolving landscape of renewable energy incentives, the IRS provides valuable tax credits to encourage the production and use of sustainable fuels. If you’re involved in the biodiesel, renewable diesel, or sustainable aviation fuel (SAF) industries, understanding IRS Form 8864 and its instructions is essential for claiming these credits. This comprehensive guide breaks down the purpose of Form 8864, eligibility requirements, how to file, and recent updates as of 2026. Whether you’re a producer, seller, or blender, this article will help you navigate the process to maximize your tax benefits.
What Is IRS Form 8864?
IRS Form 8864, titled “Biodiesel, Renewable Diesel, or Sustainable Aviation Fuels Credit,” is used to claim credits under section 40A of the Internal Revenue Code for biodiesel and renewable diesel fuels, as well as section 40B for sustainable aviation fuel. The form allows taxpayers to calculate and report credits based on the production, sale, or use of qualifying fuels. These credits are designed to support environmentally friendly alternatives to traditional fossil fuels, promoting energy independence and reducing carbon emissions.
The section 40A credit encompasses several components:
- Biodiesel credit
- Renewable diesel credit
- Biodiesel mixture credit
- Renewable diesel mixture credit
- Small agri-biodiesel producer credit
For sustainable aviation fuel, the section 40B credit applies specifically to fuels used in aviation that meet certain environmental standards. Claim the credit for the tax year in which the sale or use of the fuel occurs, not necessarily when production happens.
The latest revision of Form 8864 is dated December 2025, with instructions also revised in December 2025 and posted on January 7, 2026. This update ensures the form aligns with current tax laws, including provisions from the Inflation Reduction Act and other recent legislation affecting renewable fuels.
Who Is Eligible to Claim the Credits?
Eligibility for the credits on Form 8864 depends on your role in the fuel supply chain. Generally, the following parties can claim the credits:
- Producers: Those who manufacture biodiesel or renewable diesel from qualifying feedstocks, such as vegetable oils, animal fats, or biomass.
- Blenders: Individuals or businesses that mix biodiesel or renewable diesel with other fuels to create qualifying mixtures.
- Sellers or Users: For sustainable aviation fuel, claimants include producers or blenders who sell or use the fuel in aircraft.
- Small Agri-Biodiesel Producers: Farms or small operations producing biodiesel from agricultural products, with additional credits available for production capacity under certain limits.
To qualify, fuels must meet IRS definitions and certification requirements. For instance, biodiesel must be monoalkyl esters of long-chain fatty acids derived from plant or animal fats, while renewable diesel is a fuel derived from biomass that meets ASTM standards for diesel fuel. Sustainable aviation fuel must achieve a lifecycle greenhouse gas emissions reduction of at least 50% compared to conventional jet fuel. Claimants may need to register with the IRS as a biodiesel producer or blender and obtain certificates from suppliers to verify eligibility.
Note that these credits are nonrefundable but can be carried forward to future tax years if they exceed your tax liability. Partnerships, S corporations, estates, and trusts may pass through credits to partners or beneficiaries, who report them on Form 8864.
How to File Form 8864: Step-by-Step Instructions?
Filing Form 8864 requires careful calculation and documentation. Here’s a high-level overview based on the IRS instructions:
- Gather Documentation: Collect certificates from registered producers or blenders confirming the fuel’s eligibility. Track gallons produced, sold, or used during the tax year.
- Calculate the Credits:
- For biodiesel and renewable diesel: The credit is generally $1.00 per gallon for pure fuels and $1.00 per gallon of biodiesel or renewable diesel in mixtures.
- For small agri-biodiesel producers: An additional $0.10 per gallon for up to 15 million gallons produced.
- For sustainable aviation fuel: The credit rate varies based on emissions reduction, starting at $1.25 per gallon and increasing for greater reductions. Use the form’s worksheets to compute totals.
- Complete the Form:
- Enter your identifying information and tax year.
- Report gallons and multiply by the applicable credit rate on the relevant lines.
- Subtract any excise tax benefits previously claimed (e.g., via Form 720 or Form 8849).
- Attach Form 8864 to your income tax return (e.g., Form 1040, 1120, or 1065).
- File Electronically or by Mail: Submit with your annual tax return. For refunds of excise taxes related to these fuels, use Form 8849 or Form 4136 instead.
For fiscal-year partnerships, use the December 2025 revision to report credits received. Always consult the official instructions for line-by-line guidance, available at https://www.irs.gov/pub/irs-pdf/i8864.pdf.
Recent Updates and Changes for 2026
As of February 2026, key developments include:
- Revised Form and Instructions: The December 2025 revision incorporates updates for reporting biodiesel, renewable diesel, or SAF credits from fiscal-year entities.
- Safe Harbors for SAF Credit: Introduced in February 2024, these provide simplified compliance methods for verifying emissions reductions in sustainable aviation fuel production.
- Expanded Eligibility: Recent legislation has broadened SAF definitions and credit rates to support the aviation industry’s transition to low-carbon fuels.
Stay informed by checking the IRS website for any amendments, as tax laws can change. Related publications like Publication 510 (Excise Taxes) offer additional context on fuel tax credits and refunds.
Related Forms and Resources
To fully leverage these credits, consider these IRS resources:
- Form 720: Quarterly Federal Excise Tax Return
- Form 4136: Credit for Federal Tax Paid on Fuels
- Form 8849: Claim for Refund of Excise Taxes
- Publication 510: Excise Taxes (Including Fuel Tax Credits and Refunds)
For the most accurate advice, consult a tax professional or visit IRS.gov for the latest forms and instructions.
By claiming the biodiesel, renewable diesel, or sustainable aviation fuels credit via Form 8864, you not only reduce your tax burden but also contribute to a greener energy future. Download the instructions PDF here: https://www.irs.gov/pub/irs-pdf/i8864.pdf. If you have questions, the IRS offers support through its helplines and online tools.