Businesses installing solar panels can recover a significant portion of the cost through depreciation, on top of the federal tax credit — a benefit not available to homeowners installing on their primary residence. Commercial solar systems qualify for MACRS 5-year depreciation, plus first-year bonus depreciation, dramatically improving project economics.
Solar Depreciation Basics for Businesses
| Depreciation Type | Applies To | Timeline |
|---|---|---|
| MACRS 5-year schedule | Commercial/business solar systems | Depreciated over 5 years (accelerated) |
| Bonus depreciation | Eligible systems placed in service | Partial first-year deduction (phasing down) |
| Residential (25D) | Homeowner-owned residential systems | Not applicable — no depreciation for personal property |
How MACRS Depreciation Works
The Modified Accelerated Cost Recovery System (MACRS) lets businesses depreciate solar equipment over 5 years rather than the system’s actual 25+ year useful life, front-loading tax deductions into the years when cash flow matters most.
Bonus Depreciation Stacking
Bonus depreciation allows an additional first-year deduction on top of the standard MACRS schedule, though the percentage has been phasing down in recent years — check current-year rates with a tax professional.
Depreciable Basis and the ITC
When claiming the Section 48E investment tax credit, the depreciable basis must be reduced by half the credit amount — a required adjustment that still leaves substantial depreciation value even after the ITC.
Depreciation Doesn’t Apply to Homeowners
Personal-use residential solar systems aren’t eligible for depreciation — this benefit is exclusive to businesses, rental properties, and other income-producing uses of solar.
Exploring commercial solar for your business? Get a free quote: (855) 427-0058
Frequently Asked Questions
Can homeowners depreciate solar panels?
No — depreciation only applies to business, rental, or income-producing solar installations.
What is MACRS depreciation for solar?
An accelerated 5-year depreciation schedule available to commercial solar systems.
Does bonus depreciation still apply to solar in 2026?
Rates have been phasing down — consult a tax professional for the current-year percentage.
How does the ITC affect depreciable basis?
The basis is reduced by half the ITC amount claimed, per IRS rules.
Is Section 48E related to depreciation?
They’re separate benefits that stack — 48E is a tax credit, MACRS is a depreciation deduction.
Do rental property owners qualify for solar depreciation?
Yes — rental and other income-producing properties can generally use MACRS depreciation.
Should I consult a tax professional about solar depreciation?
Yes — depreciation rules and basis adjustments are complex and situation-specific.
Summing Up
Commercial solar depreciation, combined with the 48E tax credit, significantly improves project economics for businesses. For a commercial solar quote, call (855) 427-0058 or visit us.solarpanelsnetwork.com.
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