Businesses in Washington, D.C., Virginia, and Maryland utilize significant amounts of energy as part of their everyday processes. For many, turning to green energy is more appealing than ever—not only to reduce the environmental impact of their carbon emissions but also to decrease costs by producing their own energy rather than consuming it from the grid.
However, the jump to commercial solar may leave businesses wondering about their options. Is the benefit worth the expense? The good news is that for many businesses, due to state and federal commercial solar incentives, the answer is “yes”.
Take this opportunity to learn about the various incentives and tax credits available to business owners to make the transition to solar even more cost-effective.
Business Investment Tax Credit
One of the most frequently utilized solar incentives for businesses is the business investment tax credit (ITC). The federal ITC program will credit your taxes in an amount equivalent to 30% of the value of the installed solar system.
This is a credit, not a deduction, which means that the 30% reduction value comes directly from the taxes you owe, rather than simply lowering your taxable income.
As a result, most businesses will see a greater ROI on their solar array than they would with a tax deduction. Businesses that want to capitalize on the federal solar ITC program should act soon; the 30% tax credit is scheduled to decrease to 26% by 2033, making now the best time to convert to solar.
Modified Accelerated Cost Recovery System
MACRS, the Modified Accelerated Cost Recovery System, is a unique benefit available only to commercial properties that allows businesses to recover the depreciated value of an installed solar array quickly—typically within five years.
Because a commercial solar energy system changes the value of the business property, seeing it depreciate as quickly as possible is beneficial, and the MACRS system accelerates how quickly a business property can capitalize on and claim this depreciation.
In combination with the federal ITC program, the Modified Accelerated Cost Recovery System can generate tax incentives equivalent to 70% (or greater) of the value of the solar array installation.
Bonus Depreciation Tax Incentive
Bonus depreciation is similar to the MACRS program, but with an altered timeline. While the federal MACRS allows for a business to accelerate its depreciation tax incentive across five years, bonus depreciation permits a commercial property to take the entire depreciation benefit within the first year of installing the solar array.
How much this saves your business and generates in ROI will vary depending on your specific circumstances, but there is a hidden benefit: depending on the state in which your business operates, you may be able to claim the federal bonus depreciation tax incentive, then claim MACRS at the state level to maximize ROI.
Solar Renewable Energy Certificate
Once your commercial solar system is installed, it can continue to generate favorable financial performance for you beyond reducing or eliminating your utility bills.
For instance, your solar array can produce solar renewable energy certificates (SRECs). States want to incentivize businesses to generate their own energy and reduce the strain on the grid supply.
As a result, when your panels generate energy, you can receive solar credits, which the utility company can purchase in order to comply with the government’s goals for their renewable energy targets.
For instance, for every 1,000 kilowatt-hours (kWh) of energy that your panels generate, you will receive one SREC. Then, you can sell your SREC on the market for between $20 and $50 depending on that day’s market price.
For commercial properties that produce a substantial amount of energy, this can quickly add up to thousands of dollars over time that is being generated at no effort, entirely automated in the background and directly deposited in your bank account.
Performance-Based Incentives
Performance- based incentives (PBIs) are similar to SRECS; in both, your business is compensated for the energy that the solar array produces.
However, while SRECs are focused on incentivizing a reduction in non-renewable energy, PBIs are paid solely as a result of decreasing the strain on the utility grid. You do not need to sell PBIs on the market as you do with SRECs; instead, the incentives you receive are established when the system is installed and occur automatically.
Learn How Solar Fits into Your Business from the Pros
Going solar is an exciting prospect for businesses due to the wide range of savings that it can achieve for your company. In conjunction with the wide range of federal and state incentives, rebates, and credits, more businesses than ever are making the switch to solar power.
The experts at Ipsun Solar are early members of the Amicus Solar Cooperative, purchase solar panels in bulk directly from manufacturers, and stay on top of new developments in solar technology as they occur so we can service our community’s needs with the best strategies possible.
Contact Ipsun Solar to explore your options for commercial solar panels and learn about the incentives that are available to you.
