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Question here: The system is $100k and the business I'm qualifying gets a 10% adder for being in an energy community. The tax credit is $40k. MACRS then says they can depreciate 80% of the total cost in 2024, which amounts to $64k, correct?
The year-one percentage will be 60% in 2024 and will drop to 40% in 2025. It is no longer 80%. The basis for depreciation is the total cost minus ½ of the tax credit amount. In this example that brings the depreciable basis down to $80,000. You would then need to multiply $80,000 by your tax rate. Your year-one depreciation would be 60% of that amount. The remaining balance and the state depreciation would follow the five-year MACRS schedule. Check out this blog to learn more: www.paradisesolarenergy.com/blog/how-commercial-solar-panel-depreciation-works We always recommend discussing and confirming tax information with your accountant.
If a business does not have enough tax liability to use the full tax credit the year the system is energized, it can carry it backward to recover paid taxes from prior years. For example, if the tax credit is $10,000 and the business only has enough tax liability in year one to use $8,000, the remaining $2,000 can be used to recapture $2,000 of paid taxes the prior year.
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START YOUR SOLAR JOURNEY HERE
👉 Request your free custom solar quote: bit.ly/3zidQIt
💻 Visit our Solar Learning Center for blogs, calculators, and more: bit.ly/4eHbN0D
Question here: The system is $100k and the business I'm qualifying gets a 10% adder for being in an energy community. The tax credit is $40k. MACRS then says they can depreciate 80% of the total cost in 2024, which amounts to $64k, correct?
Or is it 80% of the 60k?
The year-one percentage will be 60% in 2024 and will drop to 40% in 2025. It is no longer 80%.
The basis for depreciation is the total cost minus ½ of the tax credit amount. In this example that brings the depreciable basis down to $80,000. You would then need to multiply $80,000 by your tax rate. Your year-one depreciation would be 60% of that amount. The remaining balance and the state depreciation would follow the five-year MACRS schedule.
Check out this blog to learn more: www.paradisesolarenergy.com/blog/how-commercial-solar-panel-depreciation-works
We always recommend discussing and confirming tax information with your accountant.
what does it mean to "roll the tax credit back three years"?
If a business does not have enough tax liability to use the full tax credit the year the system is energized, it can carry it backward to recover paid taxes from prior years. For example, if the tax credit is $10,000 and the business only has enough tax liability in year one to use $8,000, the remaining $2,000 can be used to recapture $2,000 of paid taxes the prior year.