Wire size for 8.5 kw generator

[rjp]

I have an older Generac Centurian 8500 that I plan to connect to my house and am trying to determine the required wire size.

Model 46922. Serial number 4342210.

The nameplate specifies it is 35 amps at 240 volts, and it has two 40 amp breakers installed.

I am wondering if I can use 8/3 Romex (inside) or if I need to step up to 6 gauge. Normally, 8 gauge is good for a 40 amp circuit but my understanding is that Romex (NM-B) must be limited based on its 60 degree C ampacity, which is only 40 amps.

If I need to derate based on the 80% rule and the Romex "60C penalty" I get 1.25*35 = 43.75 amps which is greater than 40.

This seems to indicate 8 gauge Romex is not adequate, and I would have to either use 8 Ga THHN in conduit or 6 ga Romex, which is a bummer because it adds cost.

Did I do this right? Can I squeak by with the 8/3?