Lock-In 2024 Tax Credits and Reduce Liabilities with Solar
Many businesses seek to reduce their tax liabilities before the fiscal year ends, and solar projects, along with cutting one of the most rapidly increasing business costs in the last four years, provide a perfect opportunity to re-invest tax dollars into business future-proofing instead.
The heavy lifting that commercial solar does to vastly reduce record electricity rates in California is matched in impact only by the 40% tax credits that can be applied to the current year, or to any year for the next 20, if required.
Businesses may also want to take advantage of accelerated depreciation or other year-end financial strategies, which can drive last-minute investments in solar to reduce taxable income.
Here are some other applicable incentives businesses can account for in tax returns:
60% Bonus Depreciation: Under the Tax Cuts and Jobs Act (TCJA), businesses can deduct 60% of the cost of qualified solar energy equipment in 2024. In 2025, this drops to 40%. This depreciation can dramatically reduce taxable income for the year, lowering tax liabilities and improving cash flow.
The 30% Federal Investment Tax Credit allows businesses to claim a credit for 30% of the total cost of installing a solar system. Its future is uncertain due to political disagreements over renewable energy subsidies.
The 10% Energy Communities Tax Credit has been extended in 2024 to apply to almost all parts of California, but is likely to be ended abruptly toward the end of 2024 depending on the result of the Presidential Election.
Capital Gains or taxable income can be offset by solar-related tax credits and depreciation. The combination of bonus depreciation and the ITC can significantly reduce taxable profits, providing a substantial year-end tax shield.
Net Operating Loss Management: If a company incurs a net operating loss (NOL) due to accelerated depreciation from a solar investment, it can carry forward the loss to offset future taxable income.
Property Tax incentives are available in some jurisdictions, including exemptions or reductions, for businesses that invest in solar. These savings can be used to reduce operating costs and improve overall financial performance, making solar an attractive year-end investment.
It seems crazy to say it but 2024 is almost over and time is running out. Please let me know if I can get you started with a billing analysis.