COMMERCIAL FEDERAL TAX BENEFITS

What is The ITC, or Investment Tax Credit?

The ITC, or Investment Tax Credit, is a federal incentive in the United States that encourages the adoption of renewable energy sources, including solar energy, by providing tax credits to eligible businesses and individuals. The ITC is particularly relevant to the commercial solar industry as it helps businesses offset the upfront costs of installing solar energy systems on their properties.

Federal Incentives

Investment Tax Credit (ITC):

The ITC allows the owner of a solar energy system to offset 30% of the total purchase price from their tax liability.

ITC Add-ons:

• Projects located in a low-to-moderate income area may qualify for an additional 10-20% ITC

• Projects with a significant amount of the equipment/materials made in the USA can qualify for an additional 10% ITC

• Solar installed on a brownfield can receive an additional 10% ITC

• Projects installed in an area with significant employment or tax revenue related to the extraction, transportation, or storage of coal, oil or natural gas AND have an unemployment rate higher than the national average may receive an additional 10% ITC

• Solar projects in an area where a coal mine or a coal-fired electric power plant was decommissioned on or after 1999 can receive an additional 10% ITC

Bonus Depreciation:

Owners of a new solar array can claim 100% of the depreciation of the system within the first year. This incentive is in addition to the ITC.

Use the following equation to calculate the Bonus Depreciation:

Project cost x (100% – ITC rate/2) x tax rate

Ex: $1,000,000 project x 85% x 35% tax rate = $297,500