Federal Policy

The Tax Advantages of Solar

Investment Tax Credit The Investment Tax Credit (ITC) is a federal tax incentive that allows individuals or businesses deduct a certain percentage of the investment costs, dollar for dollar, from their taxes. The credit is in addition to the allowances for depreciation. The ITC for solar currently a 26% credit claimed against the tax liability of the investors in the solar energy property. The Section 48 credit dictates that whichever entity or individual that purchases the system may apply for the tax credit.

The ITC remains at 26% for 2021 and 2022, then it continues stepping down to 22% in 2023, and after 2023 it permanently steps down to 10% for commercial entities. Notice 2018-59 provides further guidance on when a project ‘commences’ construction and the standard that must be meet for purposes of claiming the credit.

MARCS Bonus Depreciation US tax code allows for a business’ investments in certain tangible property to be recovered, for tax purposes, over a specific time period. Qualifying solar energy equipment is eligible for a cost recovery period of 5 years. With the ITC claimed, the owner must reduce the project’s depreciable basis by one-half the value of the 26% ITC. This means, you are able to deduct 87% of the project costs.

In response to the economic downturn of 2008, Congress took action to further incentivize business to invest in capital projects. The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 allows companies to claim 100% depreciation bonus on qualifying capital equipment purchased. The Tax Cuts and Jobs Act of 2017 (TCJA) continued the ability to depreciate the capital project as long as it is placed in service before December 31, 2023.

Genie Energy Ltd., (NYSE: GNE, GNEPRA) is a global energy solutions company. We supply customers in the US and Europe with electricity, including electricity generated from renewable resources and with natural gas. Through Genie Solar Energy and Prism Solar, we design, construct and install commercial solar energy solutions. We provide commercial and industrial clients with energy brokerage and consultative services through our Diversegy brand.