Commercial Solar Incentives

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30% Federal Investment Tax Credit (ITC)

A tax credit is a dollar-for-dollar reduction in the income taxes that a person or company claiming the credit would otherwise pay the federal government.  The Energy Policy Act of 2005 created the 30% ITC for commercial (and residential) solar energy systems. At the end of 2015, Congress extended the ITC for projects completed by the end of 2023.

The ITC is equal to 30 percent of the basis that is invested in the eligible solar installation that have commenced through 2019. Starting in 2020 the ITC steps down to 26% then to 22% in 2021. After December 31, 2022, the commercial credit will drop to 10% (and residential will drop to 0%).

This is a fantastic solar tax incentive for taxpaying entities to take advantage of—while it still remains available!

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5-Year Accelerated Depreciation (MACRS)

The Modified Accelerated Cost Recovery System (MACRS), established in 1986, is a method of depreciation in which a business’ investments in certain property are recovered, for tax purposes, over a specified time period through annual deductions.

The IRS has classified solar PV equipment as 5-year property, allowing a commercial taxpaying entity the ability to expense or write-off a solar investment quickly. The added tax deduction can help further boost a solar project’s return on investment (ROI).  NOTE:  your project might qualify for even faster write-off using Section 179 depreciation allowances.  Congress frequently tampers with the Section 179 limits and your tax professional should guide you accordingly.

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Can’t Take the Tax Benefits?

If your company can’t monetize the tax credit, a solar operating lease is a great alternative. A solar lease may allow the lessor to capture the tax benefits enabling the lessee to enjoy a lower monthly lease payment.

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Illinois Solar Renewable Energy Credits (SRECs)

In Illinois and other select states, SRECs provide an outstanding solar incentive that helps an owner recoup a solar system’s investment.  SRECs have been created to help States meet Renewable Portfolio Standards (RPS) which set goals for generating a percentage of that states overall electricity from renewable energy. In Illinois, for example, an SREC can potentially cover 20% to 40% of the total solar investment.

Typically, one SREC equals 1,000 kilowatt-hours (kWh) of solar energy generated. SRECs accrue as solar electricity is generated, and are typically paid out quarterly or other interval defined by each State.

If your state does not have an SREC program, your project may still be eligible to sell the SRECs that your solar system generates into another State’s market. For example, all states surrounding Illinois such as Missouri, Indiana, Kentucky, Wisconsin, and Iowa can potentially sell their system’s SRECs into the Illinois market.

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USDA REAP Grant for Small Businesses

For small rural businesses, a USDA REAP grant can potentially provide grant funding for renewable energy projects (wind or solar) or energy-efficiency retrofits.  These grants also provide loan guarantees used to finance energy projects.

If a business is located in a rural area with a population size under 50,000—and also meets the definition of “small business”—the USDA REAP grant can provide up to 25% in grant funding. Even businesses with several hundred employees can potentially meet the definition of “small business.”  This grant is highly competitive, but can provide financial assistance if awarded.  Tick Tock Energy provides grant-writing services and has a great track record of helping our clients land grant-funding.

Keep in mind grant funding is also considered taxable income.

Contact Tick Tock Energy today to speak with a knowledgeable sales consultant who can help you further understand and navigate the available options, and identify solar incentives for your location and business.

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