Depreciation Incentives

Depreciation incentives are tax benefits that allow commercial and business solar system owners to recover the cost of their investment by deducting a portion of the system’s value from their taxable income each year. The most significant depreciation benefit for solar is the Modified Accelerated Cost Recovery System (MACRS).

Under MACRS, commercial solar systems can be depreciated over five years, allowing businesses to write off the system’s value much faster than its actual useful life. Additionally, bonus depreciation (currently at 80% in 2026, stepping down from 100% in previous years) lets businesses deduct a large portion of the cost in the first year. The depreciable basis is the total system cost minus half of the ITC amount. For example, on a $100,000 commercial system: after the 30% ITC ($30,000), the depreciable basis is $85,000 ($100,000 minus $15,000). Depreciation incentives are primarily a commercial benefit — homeowners using solar for personal use cannot claim MACRS. However, these incentives are a major driver of commercial and utility-scale solar adoption. Business owners should work with a tax professional to maximize these benefits.