Understanding financed solar with bonus depreciation
Why year one often looks better than expected
Bonus depreciation and loan financing can be combined, and the combination often works in your favor. On a $240,000 system financed with a 10% down payment and a 7-year loan at 7%, the ITC and 100% bonus depreciation together deliver $123,000 in year-one tax benefits, more than covering the $63,120 you'd pay in down payment plus a full year of loan payments. That's before counting a single dollar of electricity savings. Check your exact ITC rate with the ITC calculator to sharpen this number, and for the official rules on depreciation methods and recovery periods, IRS Publication 946 covers how MACRS applies to business property, including solar equipment.
Ownership determines depreciation, not payment method
Depreciation is based on who owns the system, not how you paid for it. As long as you own the system, whether through cash or a loan, you claim the same ITC and bonus depreciation as a cash buyer. A lease or PPA works differently, since the financing company owns the system in those structures and claims the tax benefits itself. Check the loan vs. cash comparison if you're still weighing ownership structures. For the financing side of this decision, see down payment impact on payback calculator.
Choosing your down payment and loan term
Most commercial solar lenders ask for 0% to 20% down, with 10% being a common middle ground. A larger down payment lowers your monthly payment and total interest, while a 0% down loan preserves more cash but usually comes with a higher rate. A shorter loan term means higher payments but less total interest paid over the life of the loan. If a conventional solar loan doesn't fit your needs, the SBA's 504 loan program offers long-term fixed-rate financing specifically for major fixed assets, including renewable energy equipment, sometimes at better terms than a solar-specific lender, and the down payment impact on payback calculator can help you find the down payment size that makes the most sense for your cash position. Before you budget, check what you can claim back. The federal tax credit calculator in our Rebates & Incentives section estimates the federal credit and state rebates for a system like this one.
What happens after the year-one windfall
After year one, the ITC and bonus depreciation windfall are gone, so you're left with just the ongoing loan payment against your electricity savings. That's the point where the payback calculator becomes the more useful tool for tracking your multi-year cash flow, since it accounts for savings continuing well past the tax benefit year, and the bonus depreciation calculator confirms exactly what that year-one figure included, alongside the rebate plus ITC combined calculator in our rebates and incentives section if you're also stacking a state or utility rebate on top. A battery can cut demand charges as well as store power. The battery storage size calculator in our Battery & Storage section can help you size one for your peak load.