For many businesses and large-scale operations that are considering solar, the conversation often simply starts with energy savings. However, the real financial advantages come from taxes, specifically MACRS accelerated depreciation.
The MACRS system is one of the most powerful tools out there for improving solar panel system return on investment (ROI). Electricity savings are still important, but MACRS is what shortens that payback period to improve your business’s solar panel cash flow.
What MACRS Actually Does for Solar Panel ROI
MACRS (Modified Accelerated Cost Recovery System) is a federal tax depreciation method that allows businesses to recover the cost of assets that qualify, much faster than the average equipment lifespan. Solar systems are one that qualify for MACRS.
Depreciation of solar panels on your taxes is seen as an expense that reduces your overall net income, lowering the total amount of taxes you owe yearly. Instead of depreciating a system over 20-30 years, MACRS allows businesses to recover most of that value in only 5 years. That means that solar panel ROI becomes not only a long-term investment upgrade but also a short-term tax advantage for your facility.
Why MACRS for Solar Panels Is So Valuable
MACRS for solar panels creates a large front-loaded benefit to your business’s finances.
- A large percent of the system cost depreciates in the first few years.
- Taxable income becomes reduced during the early stages of ownership.
- The effective cost of the system drops majorly after tax savings are applied.
This is especially good for businesses that have consistent taxable income because depreciation can help to offset other profits.
MACRS + Solar: Accelerate Solar Panel Payback
Solar panels reduce monthly utility costs on their own, of course, but when MACRS is added, there’s a much larger positive impact. Instead of waiting decades for that solar panel ROI to make a difference, businesses can expect:
- Large tax savings in the first few years of solar panels
- A much shorter overall solar panel payback period
MACRS can also be combined with other federal incentives for businesses like the Investment Tax Credit (ITC).
Get a Bigger Solar Panel ROI with MACRS Accelerated Depreciation
If you’re looking to increase your solar panel ROI for your business but aren’t sure where to start, reach out to the experts at Redtail Solar. We will walk you through the MACRS process as part of our comprehensive solar panel process. Contact us today!
