Investing in a solar panel system has many benefits for business owners.
It provides access to tax incentive programs, decreases monthly costs through energy independence, and contributes to a desirable public image. If you have avoided solar power because of the associated costs, you should reconsider given the depreciation benefits.
Depreciation is the diminishing value of an asset over time due to regular wear and tear or obsoletion. Business owners can account for depreciation when they file their annual taxes, reducing their tax liability. This process can result in significant savings. Many types of property can depreciate as long as they have a useful lifespan longer than a year.
For businesses, depreciation offers several advantages. By deducting depreciation, a company can spread out the cost of gaining assets over time. It also allows for a more accurate measure of profits and revenue, which is important for accounting, reporting, and decision-making processes.
Any business with solar power can use commercial solar system depreciation. Special rules apply to solar panels because the federal government seeks to incentivize businesses using solar technology. For instance, solar system depreciation falls under a five-year plan for companies. Taxpayers can take advantage of the Modified Accelerated Cost-Recovery System (MACRS), an accelerated depreciation model, to claim more significant portions in earlier years, offering a more substantial immediate reduction in federal tax liability.
Due to President Donald Trump’s Tax Cuts and Jobs Act of 2017 (TCJA), enhanced bonus depreciation deductions are available for qualifying MACRS property placed in service before January 1, 2023. TCJA allows for 100% depreciation of solar panels and systems in the first year of service of a commercial solar system versus over five years.
In conclusion, businesses looking to invest in solar energy should take advantage of commercial solar depreciation benefits. With the Modified Accelerated Cost-Recovery System (MACRS) and the Tax Cuts and Jobs Act of 2017 (TCJA), solar panel system investments can be made more affordable and attractive for businesses of all sizes. South Texas Solar Systems, Inc. is here to help you navigate the complexities of solar panel system depreciation and financing options.
Contact us today to request a free solar estimate and learn more about the benefits of solar energy for your business.