While they last, federal solar tax benefits for commercial property can
Reduce Solar Electrical Cost by 40% - 80% of Utility Cost
based on your solar exposure and method of financing
A commercial photovoltaic (PV) system can provide solar electricity for 20% - 50% of utility costs for the next 25 years using capital expenditure, 40% - 60% using a solar loan (no capital expenditure needed). Each project is different based on solar exposure, building orientation and how the system is financed.
Even if you decide to sell your property, you should recover all of what was invested plus a good portion of the future profits of the system.[i] All future electricity from the system can be added into the equity of the property. So, your investment is safe even if the property is sold.
Why would I want solar on my commercial building?
In Seattle, for example, solar electricity over the manufacturer backed warranted lifetime of the system (25 yrs) would cost $68,000 compared to $254,000 utility cost! With that ratio it’s simply a smart thing to consider. Prices for commercial projects range from $17,000 to $170,000 depending on your electrical needs and site space.
Even if a PV system might not meet much or all of your company’s electrical needs it does the right thing for our Northwest environment while you make money doing it.
The commercial benefits for solar can be used for PV systems installed on:
Business property you own
Residential or commercial rentals you own, or
Property you are renting for your business in which the electrical service is in the business name (in coordination with property owner and co-benefits/sales agreement).
a simple pre-assessment of your property using satellite imagery
Will indicate whether your property qualifies.
How Commercial Solar Works
You can recover your original investment in 6-10 years using three benefits. Even with a solar loan a system will still pay for itself while providing significantly lower cost electricity than your utility. This opportunity, however, lasts only as long as the Federal Tax Benefits last.
Commercial Solar Benefits:
30% of the cost can be recovered immediately through a solar Federal Tax Credit (ITC). This is guaranteed by Federal law and can be applied immediately. If your tax liability that year is less than the tax credit, the balance can be applied to the previous tax year or 20 years forward from that point. The 30% tax credit will be reduced in 2020 and continue to fall after that.
24-37% (x .85) can be recovered using the 5 year solar accelerated depreciation benefit (MACRS). This benefit is also guaranteed by existing Federal law. Whether you use regular or bonus MACRS you can recover the percentage of your tax bracket times 85% of the project cost in tax savings. For example, if a project cost $150,000 and you are in the 32% tax bracket, you stand to recover $40,800 in tax savings depreciating the PV system over the next 5 years.
If you elect to use the bonus depreciation schedule you can depreciate as much as 37.4% of the project cost in the first year alone.
The electricity produced by the system will be used by your company at a much lower cost than what you are currently paying your utility. Overflow electricity flows into the grid and gets credited to your account for later consumption via Net Metering. Even after the 25-years of product warranty the solar modules should continue to produce electricity years later.
Two or Three things are critical to take advantage of this current opportunity:
You need to have good solar exposure and building orientation.
You must decide to do this while the Federal Tax Benefits are still available. The current 30% tax credit will end at the end of 2019. It will go to 26% for 2020, 22% for 2021 and 10% thereafter for commercial projects.
If you decide to use a solar loan you must have adequate credit in order to originate the loan.
[i] According to the Uniform Standard of Professional Appraisal Practice (USPAP), a cost appraisal for your property takes into consideration all the present and future assets of the property and its improvements. In consideration of photovoltaic systems, the value of the property includes the value of the electricity and any unused tax benefits the system will earn over the next 30 years, which is significantly more than your original investment. Check with your tax adviser to learn how this would work for your specific tax situation.
Contact Forecast Solar for a free, no obligation solar assessment and cost/benefit analysis to see if your business or property qualifies. Consult your tax preparer to confirm these great solar benefits and how they might be used in your specific tax situation and future business plans.