There are two subsidies that together can reduce the cost of a commercial solar power system by 70-75% of the original installed price.
Renewable Energy Investment Tax Credit
The Federal Business Energy Tax Credit (or “Investment Tax Credit” or “ITC”) is a 30% tax credit available to commercial businesses that invest in or purchase solar property in the United States. Solar energy property includes equipment that uses solar energy to generate electricity.
In December 2015, the ITC was extended through the end of 2019 with provisions for reduced percentage credits of 26% for 2020, 22% for 2021, and 10% thereafter. For more information, please refer to Business Energy Investment Tax Credit (ITC) website and Form 3468, Investment Credit page on IRS.gov.
Under the Modified Accelerated Cost Recovery System (“MACRS”), businesses can recover investments in solar property through depreciation deductions -- for solar/photovoltaic property placed in service after 1986, the current MACRS property class is five years. For more information and to claim MACRS see IRS Publication 946, IRS Form 4562.
Special Depreciation Allowance – “50% Bonus” Depreciation
The Consolidated Appropriations Act, signed in December 2015, extended the "placed in service" deadline for bonus depreciation. Equipment placed in service before January 1, 2018 can qualify for 50% bonus depreciation. Equipment placed in service during 2018 can qualify for 40% bonus depreciation. And equipment placed in service during 2019 can qualify for 30% bonus depreciation.
The allowance applies only for the first year you place the property in service. For qualified property placed in service in 2016, you can take an additional 50% special allowance. See the IRS.gov website for more information.
Now that you know about these subsidies, click here to learn about other ways Sunlight Electric can make solar power affordable for your business.