Solar Project Commercial Funding- Part 1- Federal Tax Credit

Solar is a great way to save money on your electric bill, and it’s not just for residences. Commercial properties can take advantage of solar. While it’s a much bigger investment than going solar on your home, there are more funding programs available depending on your building and business. In this blog series, we will cover a different commercial funding program each week.

Disclaimer: The following provides an overview and does not constitute professional tax advice or other professional financial guidance. It should not be used as the only source of information when making purchasing decisions, investment decisions, or tax decisions, or when executing other binding agreements.

The solar investment tax credit (ITC) is a tax credit that can be claimed on federal corporate income taxes for 30% of the cost of a solar photovoltaic (PV) system that is placed in service during the tax year. Typically, a solar PV system eligible for the ITC can also use an accelerated depreciation corporate deduction.
To qualify;
• A solar PV system must be placed into service before December 31, 2016, to claim the 30% ITC—the tax credit is scheduled to be decrease to 10% starting in 2017
• Must be used by someone subject to U.S. income taxes (i.e., cannot be used by
a tax-exempt entity like a school, municipal utility, government agency, or charity)
• Must be located in the U.S. (but not U.S. territories unless owned by a U.S. corporation or citizen)
• Must be new and not previously used equipment

The ITC is calculated by multiplying 30% by the “tax basis,” which is the amount invested in eligible property. Eligible property includes the following expenses related to a solar PV system:

  • Solar PV panels, solar curtain walls, and sales and use taxes on the equipment
  • Installation costs and racking
  • Step-up transformers, circuit breakers, and surge arrestors
  • Energy storage devices, power conditioning equipment, and transfer equipment

To claim the ITC, a taxpayer must fill out and attach IRS Form 3468 to their tax return. Instructions for filling out the form are available here.
For more information, contact the Internal Revenue Service, 1111 Constitution Avenue, N.W., Washington, DC 20224, (800) 829-1040.
For a downloadable PDF, click here.

Interested in a commercial solar site assessment? Click here!

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