MACRS (Modified Accelerated Cost Recovery System)

The Modified Accelerated Cost Recovery System (MACRS) is a federal tax depreciation schedule that allows commercial and business solar system owners to recover the cost of their investment through annual tax deductions over a 5-year period, even though the system lasts 25+ years.

MACRS is one of the most valuable incentives for commercial solar. Under the 5-year MACRS schedule, businesses can deduct the depreciable basis of their solar system (total cost minus half the ITC value) from taxable income using an accelerated schedule: approximately 20% in year 1, 32% in year 2, 19% in year 3, 12% in years 4 and 5, and 6% in year 6. Combined with bonus depreciation (80% first-year deduction in 2026, stepping down in subsequent years), a business can deduct a significant portion of the system cost in the first year alone. For a $200,000 commercial system with the 30% ITC ($60,000) and MACRS deductions, the combined tax benefits can cover 50–60% of the original cost within the first few years. MACRS does not apply to residential (personal-use) solar systems — only to systems used for business or commercial purposes.