IRS Form 8835 – In an era where sustainable energy is more critical than ever, the U.S. government offers incentives to promote renewable electricity production. One key tool for taxpayers is IRS Form 8835, which allows eligible producers to claim the Renewable Electricity Production Credit (PTC). This credit, established under Section 45 of the Internal Revenue Code, rewards the generation and sale of electricity from qualified renewable sources. Whether you’re a wind farm operator, a biomass facility owner, or involved in geothermal energy, understanding Form 8835 can help maximize your tax benefits. In this comprehensive guide, we’ll cover eligibility, calculations, filing instructions, and recent updates to ensure you’re fully informed for tax year 2025 and beyond.
What Is the Renewable Electricity Production Credit?
The Renewable Electricity Production Credit is a federal tax incentive designed to encourage the production of electricity from renewable resources. It provides a per-kilowatt-hour (kWh) credit for electricity generated at qualified facilities and sold to unrelated parties. The credit is available only for production in the United States or U.S. territories. Originally part of efforts to reduce reliance on fossil fuels, this credit has been extended and modified through legislation like the Inflation Reduction Act (IRA) of 2022.
Key highlights include:
- Credit Duration: Typically available for 10 years from the date a qualified facility is placed in service.
- Phaseout Considerations: The credit may phase out based on market prices for electricity, but recent adjustments have made it more accessible.
- Transition to New Credits: Note that for facilities placed in service after December 31, 2024, the credit transitions to the Clean Electricity Production Credit under Section 45Y, a technology-neutral incentive. However, Form 8835 remains relevant for existing facilities.
This credit not only lowers tax liability but also supports environmental goals by incentivizing clean energy production.
Eligibility Requirements for the Renewable Electricity Production Credit
To claim the credit using Form 8835, you must meet specific criteria related to the type of energy resource, facility qualifications, and production activities.
Qualified Energy Resources
Eligible resources include:
- Wind
- Closed-loop biomass
- Open-loop biomass
- Geothermal energy
- Solar energy
- Municipal solid waste (including landfill gas and trash combustion)
- Qualified hydropower production
- Marine and hydrokinetic renewable energy
These must be produced at a qualified facility, and the electricity must be sold to an unrelated person.
Qualified Facilities
A facility qualifies based on when it was placed in service and the resource type:
- Wind facilities: Placed in service after December 31, 1993.
- Closed-loop biomass: After December 31, 1992.
- Open-loop biomass: Before January 1, 2025 (with minimum 150 kW for livestock waste).
- Geothermal or solar: After October 22, 2004 (solar for electricity after December 31, 2021).
- Landfill gas or trash: After October 22, 2004.
- Hydropower (incremental): After August 8, 2005.
- Marine/hydrokinetic: After October 2, 2008.
Construction must begin under the Physical Work Test or 5% Safe Harbor, with the facility placed in service within four years (extensions available for certain delays). Facilities claiming credits under Sections 45K or 48 for biogas are excluded.
Generally, the owner claims the credit, but lessees or operators may qualify for certain biomass facilities.
How to Calculate the Renewable Electricity Production Credit?
The credit amount is based on kWh produced and sold, multiplied by an applicable rate, with adjustments for inflation, bonuses, and reductions.
Base Rates
- For facilities placed in service before 2022: 1.5 cents per kWh (most resources); 3.0 cents for wind, closed-loop biomass, and geothermal.
- Post-2021 facilities: 0.3 cents per kWh (most); 0.6 cents for wind, closed-loop biomass, geothermal, and solar.
- Post-2022 for hydropower and marine/hydrokinetic: 0.6 cents per kWh.
Rates are adjusted annually for inflation.
Adjustments and Bonuses
- Increased Credit Multiplier: Multiply the base by 5 for facilities with maximum output under 1 MW, construction starting before January 29, 2023, or those meeting prevailing wage and apprenticeship (PWA) requirements (attach Form 7220).
- Domestic Content Bonus: +10% if the facility uses U.S.-produced steel, iron, and manufactured products (certify per Notice 2023-38).
- Energy Community Bonus: +10% if located in an energy community (e.g., brownfields, areas with high fossil fuel dependence, or coal closure sites; expanded in 2025 to include advanced nuclear areas per P.L. 119-21).
- Phaseout: Reduced if the reference price exceeds a threshold; no credit if the price is too low.
- Tax-Exempt Bond Reduction: Reduced by up to 15% based on tax-exempt financing.
- Elective Payment/Transfer: Applicable entities can elect direct payment (treated as tax payment) or transfer the credit for cash under Section 6418 (pre-filing registration required).
For 2024 starts, a 90% phaseout applies unless meeting small output or domestic rules (exceptions per Notice 2024-09).
Step-by-Step Guide to Filling Out IRS Form 8835
Form 8835 is structured into parts for facility information and credit calculations. Attach it to your tax return (e.g., Form 1120, 1040, or 1065).
Part I: Facility Information
- Line 1: Enter pre-filing registration number.
- Line 2: Describe the facility and qualified resource.
- Line 3: Provide address or coordinates.
- Line 4: Date construction began.
- Line 8: Check boxes for increased credit (e.g., <1 MW, PWA compliance).
- Line 9: Domestic content checkbox (attach certification).
- Line 10: Energy community checkbox.
Part II: Credit Calculation
- Line 1: kWh produced × applicable rate.
- Line 3: Phaseout adjustment (often 0 for calendar years).
- Lines 5a-d: Tax-exempt bond reduction.
- Line 9: Apply increased multiplier (×5).
- Line 10: Domestic content bonus (×10%).
- Line 11: Energy community bonus (×10%).
- Line 13: Elective payment phaseout (×0.9 if applicable).
- Line 14: Add pass-through credits from K-1 or 1099-PATR.
- Line 16: Cooperative allocations.
Report the total on Form 3800 (General Business Credit) or other applicable forms like 8810 or 8582-CR. For multiple facilities, file separate forms unless using 2023/2024 reporting relief (aggregate if over 200 forms).
Download the latest Form 8835 and instructions from IRS.gov.
Recent Changes and Updates for 2025-2026
The IRA significantly enhanced the PTC:
- Lower base rates but with multipliers for compliance.
- Mandatory pre-filing registration for elective payments or transfers.
- Expanded energy communities to include nuclear advancement areas starting post-July 4, 2025.
- Reporting relief for tax year 2023 and 2024: Aggregate credits on a single form if exceeding 200 facilities.
As of January 2026, the form and instructions were updated on January 7, 2026. Stay informed via IRS notices like 2023-38 (domestic content) and 2024-09 (phaseout exceptions).
How to File Form 8835?
File electronically or by mail with your annual tax return. Consult a tax professional for complex calculations or if claiming bonuses. Pre-filing registration is required for certain elections—visit IRS.gov for details.
Frequently Asked Questions About IRS Form 8835
Who can claim the Renewable Electricity Production Credit?
Owners or operators of qualified renewable energy facilities producing and selling electricity to unrelated parties.
What is the credit rate for 2025?
Base rates range from 0.3 to 0.6 cents per kWh, adjustable for inflation, with multipliers up to 5x and bonuses up to 20%.
How does the phaseout work?
It’s based on electricity reference prices; if prices are high, the credit reduces or eliminates.
Can I transfer the credit?
Yes, under Section 6418 for cash, with pre-registration.
Where can I find the form?
Download from IRS.gov/Form8835.
Conclusion
IRS Form 8835 plays a vital role in supporting renewable energy initiatives by providing substantial tax credits. By understanding eligibility, calculations, and updates, you can effectively claim this benefit and contribute to a greener future. Always use the latest IRS resources and consider professional advice to ensure compliance. For more details, explore official IRS publications and consult with experts in renewable energy taxation.