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Solar Incentives for Farms and Rural Businesses

Federal Tax Credit

The federal solar income tax credit is a, 30% of the total solar energy installation cost, tax credit. This federal solar income tax credit is available to both families and businesses. There are two important key understandings related to the federal solar income tax credit. The first is that money owed or paid to the IRS, can now be applied toward paying for your family or busineess, 25 -30 year, electric utility costs. The second is that a family or business must have the federal income tax liability, in which to apply the federal income tax credit. Tax liability can be an issue for those that are retired or some business situations. Even if you don’t have enough tax liability to claim the entire credit in one year, you can “roll over” the remaining credits into future years for as long as the tax credit is in effect. However, remember that if you sign a lease or PPA with a solar installer, you are not the owner of the system, and thus you cannot receive the tax credit.

2016 – 2019: The tax credit remains at 30 percent of the total solar installation cost of the solar energy system.
2020: The federal income tax credit will be reduced to 26 percent of the total solar installation cost of the solar energy system.
2021: The federal income tax credit will be reduced to 22 percent of the total solar installation cost of the solar energy system.
2022+: The federal income tax credit will be reduced to 0 percent of the total solar installation cost of the solar energy system for residential installations. The federal income tax credit will be reduced to 10 percent of the total solar installation cost of the solar energy system for any commercial installation. Owners of a new commercial solar energy systems can deduct 10 percent.

 

MACRS Modified Accelerated Cost Recovery System

The U.S. tax code allows for a tax deduction for the recovery of the cost of tangible property over the useful life of the property. The current depreciation method is Modified Accelerated Cost Recovery or MACRS. It is a method of depreciation in which a business’ investments in certain tangible property are recovered, for tax purposes, over a specified time period through annual deductions. Qualifying solar energy equipment is eligible for a cost recovery period of five years. For equipment on which an Investment Tax Credit (ITC) grant is claimed, the owner must reduce the project’s depreciable basis by one-half the value of the 30% ITC. This means the owner is able to deduct 85 percent of his or her tax basis.
Currently, there is a 100% bonus depreciation available for qualified placed equipment until January 1, 2023.

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