Federal Tax Credits, Rebates, and Programs to Reduce Costs on Solar Investments
Commercial and industrial solar has gradually grown over recent years, driven by declining costs, favorable government policies, and the increasing awareness of the benefits of renewable energy.
Businesses and industries have more access than ever before, given the overall affordability due to the dramatic fall in price for solar panels combined with government incentives such as tax credits, rebates, and subsidies.
Some of these benefits provide a hedge against constantly rising energy prices. However, there are still challenges that need to be addressed. For instance, the upfront costs of installing a commercial system can be substantial, which can be a barrier for some.
FEDERAL TAX CREDITS
However, the Department of Energy offers Federal Solar Tax Credits for businesses and non-profit organizations, giving them two options for solar installations.
The first option, the Investment Tax Credit (ITC), provides commercial and industrial property owners with a 30% tax credit for the total cost of installing the solar system the year it is commissioned. The ITC is set to remain at 30% until 2032.
This tax credit can be applied to both the purchase and installation of the system, significantly reducing the upfront cost for property owners.
The Production Tax Credit (PTC) would be the better option for large commercial projects or utility-scale solar systems. This credit is based on a per kilowatt-hour (kWh) for electricity generated by the system’s first 10 years of operation.
ENERGY STORAGE REBATE PROGRAM
Business owners and non-profit organizations in high fire districts or areas with a higher risk of being disconnected from power can use California’s Self-Generation Incentive Program (SGIP) energy storage technology.
For an entity looking to utilize this rebate in conjunction with the ITC, keep in mind the rebate is applied first, and then the 30% tax credit kicks in for the remaining project cost.
EARN CREDITS FROM SOLAR PRODUCTION
California also offers Net Energy Metering (NEM), which allows commercial and industrial property owners to receive credits on their electricity bills for the excess power generated by the solar systems, supporting the growth of renewable energy in the state.
BONUS TAX BENEFITS
In 2017, Bonus Depreciation was introduced in the Tax Cuts and Jobs Act, allowing system owners to depreciate their solar investment by 100% after any other tax incentives such as the ITC. At the beginning of 2023, that percentage dropped by 20% and will continue to do so annually until it reaches 0% in 2027.
By taking advantage of these incentives, commercial & industrial property owners can play a significant role in helping California achieve its renewable energy goals.
