All Energy Solar

Tax Incentives for Commercial Solar

Commercial businesses or organizations that install qualifying solar systems on their property will want to be aware of two key types of available tax credits. 

Solar investment tax credit 

The investment tax credit or ITC, is an upfront credit that reduces your income tax liability for a portion of the cost of the installation of your solar system within the tax year it’s installed. The ITC for business installations was set to drop to 22 percent in 2023, and on schedule to be reduced in subsequent years to 10 percent by 2026. Fortunately, in August of 2022, congress passed the Inflation Reduction Act (IRA) into law, which raised the tax credit  rate to 30 percent and extended that rate until 2033. 

Eligible expenses

According to the Federal Solar Energy Technologies office, “the ITC is calculated based on the cost of building the system.” It’s important to have a firm understanding of what expenses are eligible to determine how much of a tax credit the system is eligible for. Specific eligible property could include:

  • Solar panels
  • Installation costs
  • Inverters
  • Energy storage devices that have a capacity of 5 kilowatt hours or greater
  • Step-up transformers, circuit breakers, and surge arrestors

One important consideration to note is the cost of a roof installation is generally not eligible, except for incremental costs or the amount over what you would have spent if the roof was not used for solar, according to the Federal Solar Energy Technologies office.

Added incentives

In addition to these federal credits, the Database of State Incentives for Renewables and Efficiency (DSIRE) contains a long list of state incentives.  Additionally, The Office of Energy Efficiency & Renewable Energy’s website has more information on all the incentives available. There’s also helpful examples and breakdowns.

To learn more about solar for business, download our ebook Solar for Business or contact an All Energy Solar representative today.

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