Government incentives come and go. Remember Cash-For Clunkers? Just a few years ago there were also huge incentives on a vast array of other energy efficient products from electric vehicles to windows and doors, to air conditioning and furnaces, to insulation and more. Those too have now all expired or been reduced to almost nothing. The same is true for solar systems. At one time the California state utility rebate would have paid property owners as much as $2.50 per watt when they installed a solar system. Today, with the exception of a few sparsely located municipally owned utility companies, that money is all gone, leaving only the federal Intangible Tax Credit (ITC) for residential and commercial solar, and the Modified Accelerated Cost Recovery System (MACRS) for commercial solar only.
The ITC is better known as the 26% Federal Tax Credit. The ITC is a dollar for dollar offset of taxes owed, which for most qualified property owners equates to thousands of dollars in savings. However, this program steps down on December 31, 2020. Therefore, we encourage property owners to act expediently to take advantage of this valuable incentive before it is gone.
The Modified Accelerated Cost Recovery System (MACRS) is a method of depreciation in which a business’ investments in certain tangible property are recovered, for tax purposes, over a specified time period through annual deductions. Qualifying solar energy equipment is eligible for a cost recovery period of five years. This accelerated depreciation schedule can have a significant positive impact in a business’ ROI from their solar project.
The information presented on this page is general in nature and is not intended to be viewed as “tax advice”. Each property owner’s tax situation is unique. Therefore, we recommend that all property owners consult with their tax advisors with respect to any tax questions or advice regarding their solar project.