Residential Solar Panel Depreciation

The tax cut and jobs act of 2017 brought with it the option for 100 bonus depreciation on solar systems which is often a great way for businesses to quickly recover costs associated with integrating solar energy.

Residential solar panel depreciation.

Small businesses and homes drive rois through residential solar in the form of a shorter energy payback time in the long run. Qualifying solar energy equipment is eligible for a cost recovery period of five years. This is the business version of the residential renewable tax credit of 30 for homeowners. Solar panels installed for use in residential rental property meet this requirement.

The modified accelerated cost recovery system macrs established in 1986 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. Put simply depreciation is a decline in an asset s value over time. It is through solar depreciation that you can lower the burden of the solar tax credit through the deductions taken during the first few years of your solar panel setup. Normally the depreciable life of solar panels is 85 of the full solar system cost which may be depreciated roughly as follows year 1 20 year 2 32 year 3 19 2 year 4 11 5 year 5 11 5 and year 6 5 8.

46 and 48 and a special allowance for depreciation under sec. Are you interested in a free solar consultation to show you what the numbers could look like. Established a basis in solar panels and related equipment for purposes of claiming an energy credit under secs. The amount that you save on your taxes via your commercial solar investment s depreciation is based on your effective tax rate for the year.

In order to calculate the amount that you will save you must multiply the effective tax rate by the value of the year s depreciation. This is not quite the end of the story however. Commercial depreciation on a solar energy system commercial properties are eligible for the business energy investment tax credit itc of 30. 48 a 5 d property that is eligible for the general business credit is tangible property for which depreciation is allowable.

Solar panels installed for use in residential rental property meet this requirement. Satisfied the requirements of then applicable sec.