What formula is used to calculate commercial solar MACRS depreciation?

MACRS 5-Year Half-Year Convention schedule: Year 1: 20%, Year 2: 32%, Year 3: 19.2%, Year 4: 11.52%, Year 5: 11.52%, Year 6: 5.76% of the depreciable basis. Depreciable Basis = System Cost − (50% × ITC Amount). Each year's tax saving = Depreciation Amount × Marginal Tax Rate.

Can businesses depreciate solar panels?

Yes — commercial and business solar installations qualify for MACRS (Modified Accelerated Cost Recovery System) depreciation over 5 years, plus bonus depreciation (often 60–80% in the first year as of 2026). Combined with the 30% commercial ITC (Section 48E, still available for projects beginning construction by July 4, 2026), businesses can recover 70–90% of their net system cost in the first year through tax benefits alone. Note: the residential ITC (Section 25D) expired December 31, 2025.

What is the MACRS depreciation schedule for solar?

Solar systems are classified as 5-year MACRS property. Using the half-year convention, the depreciation percentages are approximately: Year 1: 20%, Year 2: 32%, Year 3: 19.2%, Year 4: 11.5%, Year 5: 11.5%, Year 6: 5.8%. The depreciable basis is reduced by half the ITC (15% of system cost if taking the full 30% ITC).

Can homeowners depreciate solar panels?

Residential homeowners cannot depreciate solar panels on their personal tax return — depreciation is a business tax benefit. Homeowners claim the ITC instead (when available). Business owners, landlords, and commercial property owners can use MACRS 5-year depreciation and bonus depreciation, which dramatically accelerates tax benefits in early years.

What is MACRS 5-year solar depreciation?

MACRS (Modified Accelerated Cost Recovery System) allows businesses to depreciate solar assets over 5 years using an accelerated schedule: 20% in year 1, 32% in year 2, 19.2% in year 3, 11.52% in years 4 and 5, and 5.76% in year 6. When combined with bonus depreciation (100% in some years), businesses can deduct most of the system cost in year 1.

Solar Depreciation Calculator (MACRS)

Calculate the MACRS depreciation tax savings on a commercial or business solar installation. Bonus depreciation and the 5-year MACRS schedule together can deliver substantial first-year tax benefits for businesses going solar.

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About This Calculator

The Solar Depreciation Calculator quantifies the tax savings available to businesses and commercial property owners through MACRS (Modified Accelerated Cost Recovery System) depreciation. Solar energy systems are classified as 5-year MACRS property, allowing businesses to depreciate the full cost over 6 tax years using an accelerated schedule. When combined with bonus depreciation — currently 60% for property placed in service in 2024, stepping down to 40% in 2025 and 20% in 2026 under current law — commercial solar can deliver enormous first-year tax deductions that dramatically accelerate project payback.

The depreciable basis for MACRS is the system cost reduced by 50% of the federal ITC. If you claim the 30% ITC on a $100,000 system, your depreciable basis is $100,000 minus 50% of $30,000 = $85,000. (The ITC basis reduction rule prevents double-dipping on the same dollar of cost.) The MACRS 5-year rates are: Year 1: 20%, Year 2: 32%, Year 3: 19.2%, Year 4: 11.52%, Year 5: 11.52%, Year 6: 5.76%. With 60% bonus depreciation applied first to Year 1, the effective Year 1 deduction is substantially higher than the standard 20% rate alone.

To use this calculator accurately for a real tax situation, consult with a CPA familiar with commercial solar taxation. The depreciable basis calculation, bonus depreciation rates, and interaction with the ITC are complex and have changed multiple times under recent tax law. Businesses financing solar through a loan can also potentially deduct interest expense, adding another layer of tax benefit. For businesses considering solar as an investment decision, the combined ITC + depreciation benefit can reduce effective net cost by 40–55% for entities in the 21% corporate tax bracket.

MACRS depreciation is exclusively a business tax benefit — residential homeowners cannot claim it. If you are evaluating commercial solar, community solar development, or agricultural solar installations, this calculator provides a useful first estimate of depreciation tax savings. Pair it with the Commercial Solar ROI Calculator for a full financial analysis of a business solar project.

Assumptions apply NREL's PVWatts methodology and National Solar Radiation Database (NSRDB) solar resource data, EPA eGRID emissions factors, and Lawrence Berkeley Lab installation cost benchmarks — reviewed quarterly by solar industry professionals. Read our full methodology and data sources.

Estimates only — not financial, tax, or legal advice. Verify important results with a licensed solar installer or financial professional before making decisions.