The use of solar power decreases the amount of CO2 gas that is emitted for electrical use. This reduces our carbon footprint size drastically.
Reduce Carbon Footprint :
The use of solar power decreases the amount of CO2 gas that is emitted for electrical use. This reduces our carbon footprint size drastically. Solar energy forms a great alternative to the power plants that use fossil fuels as their energy resource. The greenhouse gases that are emitted through burning fossil fuel are the main factors causing global warming. Solar power is a great contributing factor for creating a healthy, pollution-free, clean and green planet.
Federal Solar Tax Credit :
Under ‘The Energy Policy Act of 2005’, a business owner has the right to claim up to 30% of the total investment incurred for setting up a solar system at home. Hence, this makes a great difference in the cost of setting up the system.
Depreciation of Solar Energy Property in MACRS
Depreciation is one aspect of the tax code that facilitates greater investment in renewable energy and ultimately lower costs for consumers.
The Modified Accelerated Cost Recovery System (MACRS), established in 1986, is a method of depreciation in which a business investments in certain tangible property are recovered, for tax purposes, over a specified time period through annual deductions.
Qualifying solar energy equipment is eligible for a cost recovery period of five years.
The market certainty provided by MACRS has been found to be a significant driver of private investment for the solar industry and other energy industries.
In response to the severe economic crisis of 2008, Congress decided to further incentivize capital investment by accelerating the depreciation schedule economy-wide. The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 allowed companies to claim a 100% depreciation bonus on qualifying capital equipment purchased and placed in service by December 31, 2011. Under current law, companies that place qualifying equipment in service through December 31, 2012 are eligible for 50 percent bonus depreciation. This means that in the first year of service, companies can elect to depreciate 50 percent.
Year Deduction Tax benefit (34% tax rate)
Yr 1 $ 8,500 + $42,500 (50% bonus) $17,850
Yr 2 $13,600 $ 4,760
Yr 3 $ 8,160 $ 2,856
Yr 4 $ 4,896 $ 1,714
Yr 5 $ 4,896 $ 1,714
Yr 6 $ 2,448 $ 857
Total $85,000 $29,750
of the basis while the remaining 50 percent is depreciated under the normal MACRS schedule. For more information, the IRS released official guidance (Rev. Proc. 2011-26) concerning bonus depreciation. The 50% first-year bonus depreciation allowance was further extended for property placed in service during 2013 by the American Taxpayer Relief Act of 2012 (H.R. 8, Sec. 331) in January 2013.
If a system costs $100,000, the customer will receive a $30,000 tax credit the first year, resulting in an effective cost of $70,000 for the system. However, the MACRS cost basis will actually be $85,000 (assuming no incentives other than the federal tax credit were applied) — $85,000 is the amount that can be depreciated over 6 years. 50% of $85,000 will be deducted in year 1 and for the rest of the 50%, the depreciation factors for those 6 years are 20%, 32%, 19.2%, 11.52%, 11.52%, and 5.76%. (Note that they add up to 100% — resulting in full depreciation after 6 years.) Thus in our example of a $100,000 system with a cost basis of $85,000, your customer will be able to claim the following deductions :
Conservation of Natural Resources :
Using solar power as an alternate energy resource helps to conserve the natural resources like water and coal. Lower utilization of the resources ensures reduced wastage.
Create a “green” brand for your business and encourage your clients in preservation of our resources. Build a positive feel within your work force and differentiate yourself from competitors.
Saves Money :
Usage of solar power at homes decreases electricity bills by up to 95%. It has been seen that solar power owners save thousands every year by using solar energy. The savings depends on a number of factors like: system size, mechanisms, space available and orientation.
Due to the benefits provided by the solar power systems and its growing popularity across the nation, Nippon urges you to join hands with us and help us create a better earth with healthier living! CALL NOW 888 273 0031 for a free no obligation quote.