IRS Form 8933 – In an era where climate change mitigation is a top priority, tax incentives play a crucial role in encouraging sustainable practices. One such incentive is the Carbon Oxide Sequestration Credit under Section 45Q of the Internal Revenue Code. This credit rewards businesses for capturing and storing carbon oxides, helping reduce greenhouse gas emissions. IRS Form 8933 is the key document for claiming this credit, and with recent legislative updates, it’s more relevant than ever for taxpayers in 2026. Whether you’re in energy production, manufacturing, or direct air capture, understanding Form 8933 can unlock significant tax savings while supporting environmental goals.
This comprehensive guide covers everything you need to know about IRS Form 8933, including eligibility, calculation methods, filing tips, and the latest changes. We’ll also provide a direct download link to the form for easy access.
What Is the Carbon Oxide Sequestration Credit (Section 45Q)?
The Carbon Oxide Sequestration Credit, often referred to as the Section 45Q credit, is a federal tax incentive designed to promote the capture and secure storage of carbon dioxide (CO2) and other carbon oxides from industrial sources. It applies to qualified carbon oxide that would otherwise be released into the atmosphere, contributing to global warming.
Qualified carbon oxide includes:
- Carbon dioxide captured from industrial sources before February 9, 2018, and verified at the point of disposal, injection, or utilization.
- Carbon dioxide or other carbon oxides captured after that date from similar sources.
- Carbon dioxide captured directly from ambient air via direct air capture (DAC) facilities.
The credit is available for three main uses:
- Disposal in secure geological storage (e.g., saline formations).
- Use as a tertiary injectant in qualified enhanced oil or natural gas recovery projects, followed by secure storage.
- Utilization in processes that result in net emissions reductions, such as converting carbon into fuels, chemicals, or building materials.
This credit has been instrumental in scaling up carbon capture and storage (CCS) technologies, with billions in potential investments driven by its provisions.
Who Is Eligible for the Section 45Q Credit?
Eligibility for the Carbon Oxide Sequestration Credit hinges on several factors, making it accessible to a range of taxpayers involved in carbon management.
Key Eligibility Criteria:
- Qualified Facilities: The credit applies to industrial facilities, electricity-generating facilities, or DAC facilities that meet minimum annual capture thresholds (e.g., 12,500 metric tons for most industrial facilities).
- Ownership and Attribution: The credit generally goes to the owner of the carbon capture equipment who ensures the disposal, injection, or utilization. However, elections allow allocation to other parties, such as the entity capturing the carbon.
- Measurement and Verification: Carbon oxide must be measured at the source of capture and verified at the point of sequestration or use. Impurities like water are excluded from calculations.
- Exclusions: No credit is allowed if the facility also claims certain other credits (e.g., clean hydrogen under Section 45V). Additionally, for tax years beginning after July 4, 2025, foreign-influenced entities (as defined in recent legislation) are ineligible.
- Partnerships and Elections: Partnerships with a valid Section 761(a) election can have partners claim the credit based on ownership interest.
Taxpayers must also comply with prevailing wage and apprenticeship (PWA) requirements to qualify for increased credit rates, which can multiply the base amount by five.
If you’re unsure about eligibility, consult the IRS instructions or a tax professional, as aggregation of facilities may help meet thresholds.
How to Calculate the Carbon Oxide Sequestration Credit?
Calculating the Section 45Q credit involves metric tons of qualified carbon oxide, applicable rates, and potential adjustments. Form 8933 breaks this down into parts for facility information, elections, and credit computations.
Base Credit Rates (as of 2026):
- For equipment placed in service before February 9, 2018: $20 per metric ton for secure storage; $10 for enhanced recovery or utilization (inflation-adjusted).
- For post-February 9, 2018, equipment: Rates vary by year and method. For 2026, inflation-adjusted rates are $28.43 per metric ton for secure storage and $14.21 for injection/utilization if elected under Section 45Q(b)(3).
- Post-July 4, 2025, facilities: Standardized base of $17 per metric ton, with adjustments for DAC ($36/$26) and PWA compliance (5x multiplier).
Step-by-Step Calculation:
- Determine metric tons captured and sequestered/utilized.
- Apply the appropriate rate based on sequestration method (e.g., Line 1 for geological storage, Line 2 for injection, Line 3 for utilization).
- Adjust for PWA (multiply by 5 if met) and reduce if tax-exempt bonds financed more than 15% of the project.
- Add credits from elections by others (Line 7) and subtract any recapture (Line 10).
- Total the credit on Line 9 and report it on Form 3800.
For utilization, a lifecycle analysis (LCA) approved by the IRS and DOE is required to determine the displacement factor (0-1.00).
Recapture may apply if stored carbon leaks, calculated via Form 8933 Schedule D.
Recent Updates to Section 45Q and Form 8933 in 2026
The Section 45Q credit has evolved significantly, reflecting policy shifts toward greener energy.
- Inflation Reduction Act (2022): Increased rates, introduced direct payment options under Section 6417, credit transfers under Section 6418, and PWA requirements for higher credits. It also updated LCA procedures for utilization.
- One Big Beautiful Bill Act (2025): Standardized the base credit at $17 per metric ton for facilities placed in service after July 4, 2025, and before 2027. It prohibits claims by foreign-influenced entities post-July 4, 2025.
- 2026-Specific Guidance: Notice 2025-25 provides inflation adjustments. A safe harbor under Notice 2026-1 allows third-party verification for 2025 sequestration if EPA reporting systems are unavailable, impacting 2026 filings.
- Other Developments: Proposed regulations address stacking with credits like Section 45Z (clean fuels), and new safe harbors ensure compliance amid EPA changes to greenhouse gas reporting.
These updates make the credit more robust but add complexity—stay informed via IRS notices.
How to File IRS Form 8933?
Filing Form 8933 is straightforward but requires attention to detail.
- Gather Information: Include facility details (e.g., IRS registration number, EPA e-GGRT ID, coordinates), capture metrics, and sequestration methods.
- Complete Schedules: Use Schedules A-F as applicable (e.g., A for disposal site owners, E for credit allocations).
- Attach to Return: File with your annual tax return (e.g., Form 1120 for corporations) by the due date, including extensions. Amended returns are allowed under standard rules.
- Report the Credit: Enter the total on Form 3800, General Business Credit.
- PWA Compliance: If claiming the increased rate, file Form 7220 separately.
For partnerships, report on Form 1065 Schedule K.
Required Documentation for Form 8933
To substantiate your claim:
- Annual certifications (e.g., EPA MRV plans or ISO standards for storage).
- Contracts for disposal/injection/utilization.
- LCA approval letters for utilization.
- Engineer attestations for exceptions (e.g., commercially viable products).
- Records for IRS audits.
Pre-filing registration is needed for direct payments or transfers.
Download IRS Form 8933 PDF
Ready to get started? Download the latest version of IRS Form 8933 directly from the official IRS website: https://www.irs.gov/pub/irs-pdf/f8933.pdf. For instructions, visit https://www.irs.gov/pub/irs-pdf/i8933.pdf.
Always use the most current revision to ensure compliance.
Final Thoughts on IRS Form 8933 and the Section 45Q Credit
IRS Form 8933 is a powerful tool for businesses advancing carbon sequestration, offering financial incentives aligned with global sustainability efforts. With updates like higher rates and safe harbors, 2026 presents new opportunities—but also requires careful navigation of rules. If you’re planning a CCS project, consult a tax advisor to maximize benefits and avoid pitfalls.
By claiming this credit, you’re not just saving on taxes; you’re contributing to a cleaner planet. For more details, explore the IRS website or recent notices.