Greentech Media has done a analysis of an example solar project to show how the new tax law is a boon to buinesses considering installing solar.
The new tax plan passed by Congress introduced two provisions favorable for commercial solar installations: a reduction in the corporate tax rate and the expansion of depreciation allowances.
There was a reduction in the federal corporate tax rate from 35 percent to 21 percent. The reduction in tax rates will increase the rate of return for a commercial solar project. If you previously rejected the idea of going solar on economic grounds, you now a reason to look at the figure again.
Congress also added the benefit of doubling the amount of bonus depreciation that can be claimed on commercial solar projects.
For background, depreciation is a way to allocate the cost of a large capital investment over time, such as a new solar installation. Prior to the passage of the new tax plan, Congress allowed you to depreciate 50 percent of a new asset’s value during its first year of operation.
With the new tax bill, Congress increased the bonus depreciation to 100 percent, meaning one can essentially deduct the entire cost of the system in the first year of operation.
Once again, we find that the new tax rules help boost the return of commercial solar installations.