The current solar tax credit is 30% (30% x $70,000 = $21,000). It is used in the year the reefer is “placed in service”, and is the same tax credit as purchasing solar panels for a home. In addition, business solar equipment is eligible for depreciation. High-income clients may want to take advantage of Section 179 or 100% “bonus” depreciation. It’s calculated as follows: $70,000 purchase price of the solar reefer system minus half of the 30% solar tax credit, which equals $59,500. You will normally report it on Schedule C along with your income and business deductions.

Those who do not have high taxable income may elect 10-year straight-line depreciation, so that annual depreciation exceeds the 7% income received from the power purchase agreement. When the 2005 Energy Policy Act was passed, solar business equipment qualified for 5 years MACRS (accelerated) depreciation. You can take less depreciation as the IRS never minds if you take less than you are entitled to. Any excess solar tax credit or net operating losses can be carried back 3 year or forward for 22 years. Please check with your tax preparer first as all individual circumstances may vary!