Commercial Financial Incentives
COMMERCIAL SOLAR FEDERAL INVESTMENT TAX CREDIT
Any purchase of a solar power system before December 31, 2032 results in a 30% federal tax credit making The Investment Tax Credit (ITC) the most important financial incentive for potential solar energy customers, and one of the most lucrative tax incentives across all categories. The ITC for commercial businesses steps down to 26% in 2033 and permanently to 22% in 2034.
The Investment Tax Credit (ITC)
- The ITC can be increased an additional 10% or 20%, depending on the location of the project and domestic content of components.
- The 30% ITC will be effective through 2032 and then steps down to 26% in 2033 and 22% in 2034.
- In 2023 and beyond, commercial customers can transfer (sell!) these credits to another commercial entity. This ability to transfer credits means that more businesses can monetize the tax benefit and you no longer are required to have a tax bill that exceeds the cost of the ITC!
The federal tax credit isn’t the only incentive available to businesses. The Modified Accelerated Cost Recovery System (MACRS) allows businesses to deduct the depreciable basis of property over five years reducing tax liability and rapidly increasing the rate of return on solar investments. Businesses that utilize both the ITC and MACRS save an average of 60% of the overall cost of their solar power system through tax benefits.
The MACRS system is designed to allow businesses to recover capital costs over the property’s lifetime. The Tax Cuts and Jobs Act in 2017 includes additional incentives including an increase in the Year 1 bonus depreciation from 50% to 100%.
Rural Energy for America Program (REAP) Grants
The USDA’s REAP Grant has been boosted to 40% of the project cost. This program is only eligible for businesses in rural locations and does require an application.
Combining the REAP Grant with the ITC and other tax benefits such as accelerated depreciation can significantly reduce the cost of cutting your carbon footprint. We encourage you to consult a tax professional to ultimately determine how impactful these tax incentives can be for your solar investment.
Alabama Commercial Solar Financial Incentives
The AlabamaSAVES™ program participates in third-party lending, to commercial, industrial and non-profit businesses in Alabama for solar photovoltaic systems. It is a participating loan program where the Program will acquire a participating interest in a qualifying loan from a third-party banking partner and subordinate this acquired interest to the bank’s interest, so that the bank can afford to extend more credit to the borrower on its project. The Participating Interest can be for the lesser of either 100% of the cost of the Eligible Project; or 50% of Participating Loan. The Program’s interest rate on its Participating Interest is 2% below the rate on the Participating Loan, thus reducing the overall cost of the financing by 1%. For more information, please go to www.alabamasaves.com. AS OF MAY 1, 2020, THIS PROGRAM HAS BEEN ELIMINATED. Information on possible future grants will be added as soon as more information is available.