CALIFORNIA COMMERCIAL SOLAR TAX INCENTIVES
By James Kennedy, Founder and President Beach Cities Solar Consulting LLC
California businesses that install solar at their company’s facilities are eligible for commercial solar tax incentives that include the 26% solar Federal investment tax credit, 85% Federal depreciation (Section 179) , and California state depreciation. The combination of some of the highest electricity prices in the country and these commercial solar tax incentives make installing solar at any California business a no brainer!
Let’s walk through an example of a solar project that I brokered for a new corporate headquarters in Manhattan Beach, CA. This company is installing a 120 KW SunPower solar system at one of their new office buildings on Pacific Coast Highway in Manhattan Beach. The solar system will produce 108,884 kwh per year, which saves the company $19,054 per year in Southern California Edison bills. The gross cost of this turnkey solar project was $260,400, which means that the corporation will get a one-time U.S. Federal investment tax credit (ITC) in the amount of $67,704 for this project. It is important to note that the Federal ITC is not capped. Businesses and corporations with larger facilities that invest $1,000,000, $5,000,000, or even $10,000,000 or more into solar projects will receive a onetime 26% Federal tax credit based on the gross cost of the solar project installed.
Now, let’s look at the next commercial solar tax incentive, Federal depreciation (Section 179). Calculating the Federal depreciation figure is done by taking the gross project cost of $260,400 and multiplying it by 85% (unlike other business equipment that is put into service, a solar system already receives a 26% Federal tax credit, so the depreciation figure is not 100%). This gives us a federal depreciation figure of $221,340. We then take this depreciation figure and multiply it by the company’s Federal tax bracket, in this case 21%. The result is $46,481 of Federal tax savings!
Finally, let’s look at the last commercial solar tax incentive, California depreciation. Calculating the California depreciation figure is done by taking the gross project cost of $260,400 and multiplying it by the company’s California tax bracket, in this case 8.84%. This gives us a California depreciation figure of $23,019. The total of these three commercial solar tax incentives is $137,204, which brings down the company’s net investment in the solar system to $123,196!
Please seek the guidance of a licensed tax professional regarding your company’s specific situation as we are not tax professionals and are not providing any tax advice.
Want to see how much money your business or corporation can save with a commercial solar system? Get your turnkey solar proposal with ROI and financing options by e-mailing us your last 12 months electric bills (all pages), a picture of the electrical switchgear inside of the facility, and a picture of your roof today: email@example.com.