Solar can save your business thousands of dollars every month – but the savings goes further than just the cost at the utility meter.
You are probably already familiar with The Solar Investment Tax Credit (ITC). This 30% tax credit is a dollar-for-dollar reduction in the income taxes that a person or company can claim. Both the residential and commercial ITC are equal to 30% of the cost of solar cost. The ITC steps down to 26% in 2020 so taking advantage now is important.
But wait there’s more!
By taking advantage of BOTH the ITC 30% Tax Credit, and the MACRS Bonus (Modified Accelerated Cost Recovery System) the overall cost of a solar PV system for your business can be reduced by an additional 30% – a potential total of over 60% reduction in the original cost of your solar project.
But you must act by January 1, 2018! The MACRS Bonus program enters a phase-down cycle over a 5-year period starting in 2018!
“Depreciation” is the loss of value that occurs over time when the object purchased is sued for a specific use. As a business owner, you are eligible to deduct this “loss in value” from your taxable income when used for your business. If you are running a profitable business, and you can show that the solar power you are generating is for business use (as opposed to personal use), then it could have a strong impact on reducing your bottom line.
Under MACRS Bonus, all your qualifying commercial solar assets will fully depreciate within five years. This means that you will see the full financial benefits from your solar investment even faster than a normal 20-year straight-line depreciation which is most common for businesses.
Looking at the MACRS Bonus schedule you can see why taking advantage now will save you more, and reduce the cost of your solar project faster.
Calculating the value of the MACRS Bonus can be tricky. If you need help with this calculation please contact us directly so we can help you estimate the savings potential.
The chart below will help you understand and calculate your own potential MACRS Bonus savings. As you can see the MACRS Bonus depreciation of 50% in year 1 adds $42,500 to the calculations and thereafter the standard MACRS deduction levels take effect.
We do suggest that you have your personal tax adviser help you understand the potential impact to your business. Every case is different as is every businesses tax plan.
If you want to read the tax code specifics please see the link below to Energy.Gov – for a complete detailed explanation.