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Accelerated Depreciation Can Accelerate Your Business Going Solar

If you happen to own a business and are thinking about investing in solar panels, you’re probably trying to find answers to a lot of questions. One of them may be “Will going solar increase my profits while decreasing my costs?” This question is rhetorical because the answer is a resounding Yes! In addition to taking advantage of tax credits and other incentives, there’s another thing you can do that will increase your bottom line. It’s called ‘accelerated depreciation’, and we’re going to tell you all about it.

What is Depreciation?

Depreciation is a term used when referring to the decline in value of an asset over time. ‘Asset’ here can mean a car, a new roof, or- to use our favorite example- solar panels. When the value of a product decreases over time, that decreased value is called depreciation. It is used to convert a fixed cost into an annual expense. Business properties that last over one year can be depreciated in taxes for businesses. And for business owners such as yourself who decide to invest in solar, they have access to accelerated depreciation for their solar panels.

Now What’s Accelerated Depreciation?

Accelerated Depreciation is also called the Modified Accelerated Cost Recovery System (MACRS). MACRS is a method of depreciation where the value of your asset reduces at a faster rate in early years. The depreciation is accelerated. MACRS allows business owners to deduct the cost of your solar installation from your taxable income over a period of 5 years. This is incredibly useful for your business. It reduces the taxable income during the early years of the installation of the solar panel, and so increases the profit-making of the solar system. Plus, it helps postpone higher taxes to a later time, and that should be incentive enough.

Below is a chart with a breakdown in what percentage of your income you can deduct from the cost of the panels.

Year Depreciation Schedule
1 20%
2 32%
3 19.2%
4 11.52%
5 11.52%
6 5.76%

Why It’s So Great for a Business to Go Solar

  • Like homeowners, business owners may receive the 30% tax credit* when investing in solar energy for their businesses.
    • If you claim both the tax credit, and depreciate your system, you must reduce the depreciation amount by one-half of the tax credit. So 15%. You would still be able to depreciate 85% of the total cost of your solar panel system.
    • If you do not claim the federal tax credit, you can depreciate 100% of the total cost.
  • In addition to the tax credit, business owners who go solar also have access to the accelerated depreciation program.
    • The accelerated depreciation can reduce the overall cost of a new solar panel system purchase by 30%. And that’s on top of the tax credit already received, which makes the cost of the system just 40% of its overall price.
      • If your business is farming or ranching, you could also qualify for the USDA REAP grant. This grant gives additional funds to rural businesses to help invest or improve renewable energy systems.
  • Business owners who take advantage of the above opportunities receive a reduced tax burden and accelerated returns on your solar investment.
  • Solar panel systems typically pay for themselves within 3 to 7 years, which means your business gets to enjoy the rest of your solar system’s life with free electricity.
  • Many customers like the idea of business being committed to sustainability. By helping the planet, you’re helping your business, too.

ADT Solar’s Promise

We recognize how important it is to run a business efficiently and with the highest quality customer service. ADT Solar consultants are ready at all times to answer any questions or concerns you may have regarding your solar panels. Be sure to consult your tax professional to see how much of a benefit you would receive from MACRS.