Beyond the Solar Tax Credit: Other Financial Benefits for Commercial, Non-Profit, & Government Entities

Solar Power

Accelerated Depreciation: Under the federal Modified Accelerated Cost-Recovery System (MACRS), businesses may recover the depreciation of the solar power system at an accelerated rate of only 5-years, as opposed to the 25-year life of the system. The exact value of this incentive varies based on your specific tax bracket but generally averages around 20% of the cost of the solar power system. Allowing businesses to deduct the depreciable basis over five years reduces tax liability and accelerates the rate of return on a solar investment. This has been a significant driver for the solar industry and other energy industries.

Note that energy expenses offset by having solar have an effect on tax liability. An entity benefiting from reduced power bills will have less expense to write off. As such, the Return on Investment typically only slightly improves from depreciation with proper comprehensive analysis.

The USDA offers the Rural Energy for America Program (REAP) Grants and Loan Guarantees for rural businesses. The grant provides up to 50% of the cost of the solar array. You can take a look at this MAP TOOL to see if your business is in an eligible area - you'll be surprised at how many areas are considered rural and therefore eligible. Each quarter additional funds are allocated to the grant and loans and this will continue until all allocated funds are depleted.

Energy savings are often taken for granted in solar installations but many times there are ways to leverage solar production to provide additional financial benefit. These may take the form of pairing the production with an alternative rate plan. Georgia is often cited as being a very poor area for great energy savings but such statements are far too broad. Circumstances need to be judged on a case-by-case basis factoring in the utility rate plan options, shading factors, electric consumption patterns, etc. Regardless of whether you can save a lot or a little by generating your own electricity, you will reduce your monthly energy bills. In some cases, it’s possible to save money from day one by financing the cost of the system, but in most cases, it will take a few years for the loan payment to reach parity with the escalating cost of electricity. The key difference during that time is that money is invested in tangible property value rather than simply spent to buy energy from a utility with no ROI possible.

Property value is yet another benefit of installing a solar energy system often overlooked by potential solar consumers. Studies have shown that buildings with solar panels sell for more than those without them, and buyers are willing to pay a premium for clean energy and reduced utility costs. This means that if you ever decide to sell, you could quickly recoup the cost of your solar energy system far earlier than the advertised return on investment from energy savings. This equity is often completely overlooked by potential investors but it serves as an important safety net for anyone considering solar. With solar you pay for a tangible product with real resale value, not simply an expense like with your utility bill. The only negative resale effects come from selling property with leased solar equipment or poorly installed systems. Choosing a trusted local installer and paying outright or with a loan can prevent those common pitfalls.

Looking for information about the 30% solar tax credit? Check out our previous blog post about that.

Disclaimer: This information is not intended to be advice. All of the incentives listed have specific eligibility requirements. Consult your tax advisor to verify eligibility.

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