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 for businesses and homeowners increased to 30% and is available for solar installations and stand-alone battery storage systems commissioned anytime in 2023.
  • 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!

Tax Incentive
Depreciation

 

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
& Loans

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.