Since 2017, depreciation on solar panels has become one of the best and quickest ways to minimize installation costs while unlocking incredible savings options for business owners invested in solar. This is because depreciation enables businesses to recover costs from invested tangible solar energy assets while reducing tax liability and boosting ROIs.
Currently, the Modified Accelerated Cost Recovery System (MACRS) is the most common depreciation method for property owners today because it offers 100% Federal depreciation in year one. Essentially, MACRS depreciation speeds up the depreciation process allowing a business to start receiving the benefits of a depreciated solar system by year one, and then staggering state depreciation across the next five years. This system recovers capital costs early on, allowing business owners to strategically use these tax savings to repay loans or reinvest in new opportunities sooner rather than later.
Of course the timeline of returns for MACRS or other accelerated depreciation tax codes depends on each type of property individually. Time frames can vary between 1 to 50 years according to the type of investment made and adjust each year in response to Federal tax incentives. Depreciation is a very helpful and popular tool available to business owners interested in solar energy, if you have any questions about how it works and if it’s the right choice for your business please do no hesitate to ask.