What Is Form 8835 and How Do I File It?

Form 8835, the Renewable Electricity Production Credit, is a tax form used to claim a credit for electricity produced from specific renewable resources. The purpose of this credit is to incentivize the generation of clean energy. Taxpayers use this form to calculate the credit based on the amount of electricity produced and sold from a qualified facility during the tax year. A separate Form 8835 must be filed for each qualified facility. The credit is part of the general business credit, meaning it is subject to certain limitations and carryforward rules.

Determining Eligibility for the Credit

Eligibility for the credit hinges on two primary factors: operating a “qualified facility” and meeting specific “placed-in-service” deadlines. A qualified facility is one that produces electricity using qualified energy resources for sale to an unrelated party. These resources include:

• Wind
• Closed-loop biomass
• Open-loop biomass
• Geothermal energy
• Solar energy
• Landfill gas
• Trash
• Qualified hydropower
• Marine and hydrokinetic energy

The placed-in-service date, which is the date a facility is ready and available for its specific use, is a determining factor for eligibility. The rules and applicable credit rates can change based on legislation, such as the Inflation Reduction Act of 2022, which extended and modified the credit. For example, solar energy facilities placed in service after 2021 were reinstated as eligible for the credit.

Generally, a facility must have begun construction by a certain date to qualify. For many renewable types, construction must have begun before January 1, 2025, to be eligible for this specific credit. The IRS defines the start of construction as either beginning physical work of a significant nature or incurring at least 5% of the total project cost. The placed-in-service rules create a 10-year window during which the facility can generate credits, starting from the date it was first placed in service.

Calculating the Credit Amount

The calculation is based on the amount of electricity a qualified facility produces and sells. The core formula involves multiplying the kilowatt-hours (kWh) of electricity sold to an unrelated person during the tax year by a specific credit rate. This rate is subject to annual inflation adjustments, and the applicable rate depends on the type of renewable resource used and the date the facility was placed in service. For example, the inflation-adjusted rate for 2024 for certain facilities using wind, closed-loop biomass, or geothermal energy was 2.9 cents per kWh.

Facilities placed in service after December 31, 2021, are subject to a different rate structure introduced by the Inflation Reduction Act. These newer facilities have a base credit rate, but can qualify for a significantly higher rate by meeting prevailing wage and apprenticeship requirements. There are also potential bonus credits for projects that meet domestic content requirements for steel and iron or are located in designated “energy communities,” such as areas with former coal mines or brownfield sites.

The credit may be subject to a phase-out or reduction. For example, the credit amount can be reduced if the facility was financed with tax-exempt bonds.

Allocating the Credit for Pass-Through Entities

For pass-through entities—such as partnerships, S corporations, estates, and trusts—the credit is calculated at the entity level but claimed by the individual owners. The total credit is then passed through to the partners, shareholders, or beneficiaries on their Schedule K-1. Each owner then reports their share of the credit on their own tax return. This allocation is generally based on each owner’s proportional ownership stake in the entity during the tax year.

Filing Form 8835

Once Form 8835 is completed and the total credit is determined, it is not filed as a standalone document. Instead, it must be attached to the taxpayer’s annual income tax return, such as a Form 1040 for individuals, Form 1120 for corporations, or Form 1065 for partnerships.

The total credit amount calculated on Form 8835 is then carried over and reported on Form 3800, General Business Credit. Form 3800 is used to consolidate various business credits and to calculate any limitations on how much credit can be taken in a given year.

Any unused portion of the credit due to these limitations can typically be carried back to a previous tax year or carried forward to future tax years, according to the rules detailed on Form 3800. Furthermore, if the credit is associated with a passive activity, its use may be further limited. In such cases, taxpayers may also need to file Form 8582-CR, Passive Activity Credit Limitations, to determine the allowable credit for the year.