The Federal Investment Tax Credit (ITC)
This tax benefit was created to provide an incentive for businesses to pursue renewable energy sources. This tax credit is currently equal to 30% of the gross project cost. This will phase down to 25%, 22% and finally to 10% over the next 4 years, respectively. Effective utilization of available incentive programs can dramatically reduce the upfront cost of solar while providing a predictable long-term revenue stream.
Modified Accelerated Cost Recovery System (MACRS) and Bonus Depreciation
New depreciation laws for renewable energy projects allow businesses to write off 100% of the cost of a solar PV system in the first year or spread out over six years. Normally a system with 25+ year lifespan would be depreciated slowly over 25 years. The Bonus part of this benefit is that you are allowed to depreciate 85% of your project rather than the typical 70%. This extra bonus is unique to renewable projects.
Many businesses are able to pass these tax benefits through to their personal taxes depending on how the company is structured. We recommend you discuss this option with your tax accountant.