Tax Benefits

There are two tax benefits which together can reduce the cost of a commercial solar power system by 50%-60% of the original installed price.

Business Energy Investment Tax Credit

The Federal Business Energy Tax Credit (or “Investment Tax Credit”) 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. The ITC has a 1-year carry back provision for any unused portion of the tax credit not taken in the tax year in which the system is placed into service as well as a 20-year carry-forward provision, and can be “safe-harbored” to lock in the current rate as long as construction begins before December 31.

In 2022, the Inflation Reduction Act provided for the extension of the 30% ITC through the end of 2024, with the proviso that 2025 and beyond tax credit rates to be determined by progress made toward carbon reduction. Please refer to IRS Form 3468 and IRS Form 3468 Instructions.

In addition, please refer to 26 USC § 48(a)(3)(A) (20-yr carry-forward), to the US Department of Energy’s Guide to the Federal Investment Tax Credit for Commercial Solar Photovoltaics, and finally, the IRS News Release, Treasury, IRS Extend Safe Harbor For Renewable Energy Projects, for more information.

Modified Accelerated Cost Recovery System (MACRS)

Under the 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 – “Bonus” Depreciation

2017’s Tax Cuts and Jobs Act began the step-down of the Bonus depreciation percentage at the end of 2022, with qualifying property getting only an 80% bonus deduction in 2023, 60% in 2024, 40% in 2025, etc.

Fore information about these subsidies or any related tax treatments, please feel free to contact us at 866-GET-SOLAR or info@sunlightelectric.com.