The three most common commercial solar incentives are the federal solar investment tax credit (ITC), MACRS investment depreciation, and State incentives like the Renewable Energy Certificates (RECs).
The ITC will offset up to 26% of a commercial solar purchase in the form of a federal tax credit. To qualify for the ITC, a business must have a tax liability upon filing. The 26% tax credit is available through 2022. It will decrease again to 22% in 2023 before landing at 10% for commercial solar customers beginning January 1, 2024.
MACRS accelerated depreciation is available for every commercial solar system. This is a method of depreciation in which a business’ investments are recovered for tax purposes over a specified period via annual deductions. Currently, the solar asset can be fully depreciated in year1 due to the 100% Bonus Depreciation from the federal government.
Some states have RECs as the performance incentive. A REC is a certificate that is earned from the state for every 1,000 kWh the solar system generates. RECs have a market value and are earned for a pre-determined number of years. In NJ for instance, solar owners earn SRECs that are a fixed value of $100 each for a period of 15 years.
In addition to these, a few local utilities and municipalities offer incentive programs of their own that can be added for even more savings. A knowledgeable commercial solar installer will be able to communicate the options available in your area.