Mar 13, 2023

Solar Incentives

With the passage of the Inflation Reduction Act in August 2022, there’s never been a better time to consider solar for your business. Going solar is a strategic financial decision that can help you save for a brighter future and safeguard against future energy cost increases. 


Most businesses can install a solar array for about 15% of the total cost after incentives, a system that could save you millions of dollars over the next few decades. Better yet, most businesses can completely pay off their investment in 3-5 years. The chart below illustrates how incentives can cover much of the cost of a commercial solar project.


Now let’s dig into each of the incentives that make this possible!


Investment Tax Credit

The Investment Tax Credit (ITC), was increased to 30% of the total cost of your solar project and was guaranteed for the next 10 years. It is important to note that this is not a tax deduction (reducing taxable income) but a tax credit (a direct reduction of the tax you owe) that can be taken in the year your project is completed. 


Accelerated Depreciation

Solar arrays are eligible for the 5-year Modified Accelerated Cost Recovery System(MACRS) depreciation schedule, allowing a significant portion of the cost to be deducted from federal and state taxes in the first few years after the system is energized. Because this result is a tax deduction, not a tax credit, the actual savings depends upon your company’s effective tax rate. 


Illinois SRECs

All utilities in Illinois are required by the Illinois Power Agency to purchase Solar Renewable Energy Credits (SRECs) to help Illinois meet its renewable energy goals. Your utility will pay for the solar energy that your system generates. Typically, SRECs will return between 20% and 30% of the system cost. Although the value of SRECs is calculated based on the energy your system will deliver over the next 15 years, you will receive most of the SREC payout during the first 6 years. 


Net Billing

When your solar array produces more energy than you can use, the extra energy is returned to the grid, and you receive credit – at wholesale supply rates – for each excess kwh that your system produces. This credit can offset your electricity charges when the sun isn’t shining.  


Smart Inverter Rebate

The Smart Inverter Rebate amounts to $250 per kW of DC power installed and is paid as soon as the system is energized. This incentive typically offsets just under 10% of the total project cost. This incentive, too, is taxable. 


*Disclaimer: We are not tax advisors. We will involve your CPA in the discussion of the tax benefits of your system to ensure that it all pencils out.


When your business is on the line, trust Halo Solar. We can help you design the system that meets your unique needs. To learn more about adopting solar power and lowering your business expenditures, Contact us today.