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%. Are you interested in a free solar consultation to show you what the numbers could look like?
For those new to business ownership:
As a large purchase that will be used overtime, a solar system’s cost is deducted from taxable income via a so-called 5 year ‘depreciation’ (rather than 100% immediately as a direct ‘expense’). While 26% of the cost is recovered directly as a credit against tax liability for the year of installation (see above), the law nonetheless allows 85% of the full system cost (rather than 70%) to be deducted from taxable income over time via ‘depreciation. Depending on the tax bracket, roughly 12-25% of original system price may be recouped this way.
For more information on the federal MACRS & Bonus, see IRS Publication 946, and IRS Form 4562. IRS Brief Overview of Depreciation
Always contact a trusted tax professional to verify eligibility in business’s specific case.
By Dan Hancock, Senior Commercial Project Developer, StraightUp Solar Small businesses in the U.S. spend $60 billion a year on energy (U.S. EPA ENERGY STAR),