Biodiesel Tax Credit: Expired, Replaced by 45Z

For nearly two decades, blending biodiesel into diesel fuel came with a $1.00-per-gallon federal excise credit, claimed against Form 720 liability or refunded through Form 8849 Schedule 3. That era is over — and a surprising amount of content on the web hasn’t caught up.

The 2025 Form 4136 instructions say it directly: "The section 6426/6427 credits/refunds for mixtures of biodiesel, agri-biodiesel, and renewable diesel expired for sales, uses, or removals after 2024." Here is what died, what survived, and how the successor credit works.

What expired — and the form change that followed

The expired family: the section 6426(c) biodiesel/renewable diesel mixture credit, its section 6427(e) cash-payment counterpart, and the related agri-biodiesel amounts — all for sales, uses, or removals after December 31, 2024. Publication 510 (December 2025) instructs: "Don’t claim the credits for fuels sold or used after 2024, unless the credits are extended."

The IRS then rebuilt the claim form around the expiration. The May 2026 revision of Form 8849 dropped Schedule 3 from its schedule list, with instructions not to file Schedule 3 for any post-2024 claims. Late claims for pre-2025 gallons are still allowed within the normal limitation periods — but on the old paperwork: the August 2014 Form 8849 with the January 2023 Schedule 3.

The sustainable aviation fuel mixture credit followed its own, slightly later clock: the section 6426(k) SAF credit was terminated for any sale or use after September 30, 2025.

What replaced it: section 45Z

Congress replaced the blender-credit regime with the Clean Fuel Production Credit under section 45Z — a fundamentally different animal. It is an income tax credit, not an excise credit; it belongs to the PRODUCER of the fuel, not the blender; and the credit amount is the applicable per-gallon amount multiplied by the fuel’s emissions factor, so cleaner fuel earns more.

The IRS page sets the window: the fuel must be produced after December 31, 2024, and sold between January 1, 2025 and December 31, 2029. After December 31, 2025, qualifying fuel must be made from feedstocks produced or grown in the United States, Mexico, or Canada.

The registration requirement has real teeth: "A taxpayer cannot claim a Clean Fuel Production Credit unless the taxpayer is registered as a producer of clean fuel at a time of production." That means a Form 637 registration — activity letter CA for SAF producers, CN for other clean fuel — in hand before the fuel is made. The claim itself goes on Form 7218 with the producer’s income tax return. There is no Form 8849 path for 45Z.

Structural shift in one sentence: the old law paid whoever blended the gallons; the new law pays whoever produced them — and only if they registered first.

What this means for each player

Blenders: no federal mixture credit exists for 2025-and-later gallons. Any remaining pre-2025 claims go on the old-revision Schedule 3 within the statute of limitations.

Producers: the game moved to 45Z — register on Form 637 (CA or CN), track emissions rates, claim on Form 7218.

Fleets and end users: nothing changed. Nontaxable-use refunds — farming, off-highway business use, export, and the rest of the type-of-use table — are refunds of excise tax actually paid, were never part of the expired credit family, and continue on Form 8849 Schedule 1, Form 4136, and Form 720 Schedule C.

Beware stale content

For years the biodiesel credit lapsed and was retroactively revived so often that "it always comes back" became conventional wisdom. This time Congress replaced rather than extended: 45Z is the successor regime, on its own 2025–2029 schedule. Treat any page promising a $1.00 blender credit for current-year gallons as out of date — and note the IRS’s own careful hedge, "unless the credits are extended," which is where matters stand as of the December 2025 Publication 510.

Frequently asked questions

Is there still a biodiesel tax credit in 2026?⌄

Not for blenders. The section 6426/6427 mixture credits expired for fuel sold, used, or removed after December 31, 2024. What exists now is the section 45Z Clean Fuel Production Credit — an income tax credit for registered producers of clean transportation fuel sold through 2029.

Can I still file Form 8849 Schedule 3 for old gallons?⌄

Yes, for fuel sold, used, or removed on or before December 31, 2024, within the normal claim limitation periods — but you must use the old form revisions (the August 2014 Form 8849 with the January 2023 Schedule 3). The current form no longer includes Schedule 3.

Who can claim the 45Z credit?⌄

Only the producer of qualifying clean transportation fuel — and only if registered on Form 637 (activity letter CA for sustainable aviation fuel, CN otherwise) at the time of production. Blenders, resellers, and users have no 45Z claim. The credit is filed on Form 7218 with the income tax return.

Did fuel refunds for farming and off-road use also expire?⌄

No. Nontaxable-use refunds are a different mechanism — a refund of excise tax actually paid on fuel put to a nontaxable use — and they have no sunset. Schedule 1, Form 4136, and Form 720 Schedule C claims continue unchanged.

What happened to the sustainable aviation fuel credit?⌄

The section 6426(k) SAF mixture credit was terminated for any sale or use after September 30, 2025, and the related section 40B and 6427(e) SAF provisions expired for sales or uses after December 31, 2024. SAF production now flows through 45Z, with the CA producer registration.

Related guides

Official sources

Tax rules, rates and deadlines change — verify current requirements against the IRS sources above before acting. This guide is general information, not tax or legal advice.

The Biodiesel Tax Credit Expired — Here Is What Replaced It