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4 Reasons Why Your Business Should Go Solar for Tax Season
Are you exploring new ways to reduce tax liability for your business? Solar energy offers a powerful way to reduce operating costs, lock in energy stability, and access substantial tax benefits.
Here are four reasons why switching to solar can significantly affect your tax strategy.
1. Reduce Tax Liability with the 30% Federal Investment Tax Credit (ITC) 📈
For commercial solar projects, the ITC offers a direct federal tax credit equal to 30% of your investment in solar energy. For the sake of simple math, if your company spends $100,000 on solar, that means up to $30,000 off your federal tax bill. This credit, paired with other deductions, makes solar a valuable tool in managing your company’s tax burden.
2. Accelerated Depreciation with MACRS and Bonus Depreciation ✨
Solar investments allow businesses to benefit from accelerated depreciation through the Modified Accelerated Cost Recovery System (MACRS). With MACRS, solar equipment qualifies for a five-year depreciation period, enabling businesses to spread their deductions faster than traditional asset depreciation. Combined with the ITC, this dual benefit makes solar one of the most powerful ways to reduce tax liability with renewable energy.
Additionally, bonus depreciation—also known as the additional first-year depreciation deduction—allows companies to take an immediate deduction for a large portion of the investment in the year of installation. This benefit enables companies to reduce tax liability upfront and redeploy capital into other areas faster. This benefit enables companies to minimize tax liability upfront, redeploy capital into other areas faster, and achieve substantial tax savings, contributing to positive cash flow.
Check the Solar Energy Industries Association’s (SEIA) article on MACRS and bonus depreciation for more details.
3. Safe Harbor to Lock in Tax Benefits 🔒
We’ve all heard the phrase “the best-laid plans.” If your solar project isn’t fully completed by year-end, Safe Harbor provisions let your business lock in the current ITC percentage, provided your project meets specific criteria. GreenSpark Solar’s experts guide you through Safe Harbor requirements, ensuring you secure these savings even if project timelines shift.
Enhance Corporate Sustainability & Strengthen ESG Profiles 🌱
Investing in solar does more than lower tax liability and energy expenses—it enhances your Environmental, Social, and Governance (ESG) profile, aligning your brand with corporate sustainability.
ESG indexes continue to outperform their counterparts, with a recent study highlighting that the S&P 500 ESG Index has outperformed the S&P 500 by a cumulative 15.1% over five years.
As ESG-focused indexes consistently outperform their counterparts, solar becomes an asset for improving both financial performance and environmental impact, helping your business meet net-zero goals while reducing your tax burden.
Ready for a free solar consultation? We can help.
Our team at GreenSpark Solar is here to help you navigate how to reduce your tax liability and achieve your financial and clean energy goals with solar.
Disclaimer: This article provides an informational overview of tax incentives, including MACRS, to help business owners understand potential benefits of solar. It is not intended as financial or tax advice. Business owners considering solar installations should consult a licensed tax professional to assess their specific financial situation and eligibility for tax incentives.
