Understanding your MACRS depreciation schedule
The 6-year percentage table, explained
Solar equipment qualifies as 5-year MACRS property, which actually spans 6 tax years under the half-year convention: 20%, 32%, 19.2%, 11.52%, 11.52%, and 5.76%. On a $204,000 depreciable basis, that's a $40,800 deduction in year one alone, worth $10,200 in tax savings at a 25% combined bracket. These percentages are fixed by the IRS and apply the same way to every qualifying solar project, as laid out in IRS Publication 946, the official guidance on how MACRS applies to business property. A size estimate is only half the decision for a business. The quick financing comparison tool in our Financing section can help you work out which way to pay for the system costs less.
Why your depreciable basis isn't your full system cost
The IRS requires you to reduce your depreciable basis by half the value of the federal ITC before applying MACRS. On a $240,000 system with a $72,000 ITC, your depreciable basis is $240,000 minus $36,000, which is $204,000, not the full system cost. Run the ITC calculator first if you want to isolate that credit amount on its own, and the financing cost with ITC applied tool if part of your project is financed rather than paid in cash. If you want a second opinion on the size itself, the quick 5-minute system size estimator in our System Sizing section works from your roof area and daily load instead of your building type.
What bonus depreciation changes, and what it doesn't
Bonus depreciation lets you take a chunk of your depreciable basis as a single deduction in year one, before the standard MACRS percentages apply to whatever's left. At 100% bonus depreciation, current law under the OBBBA, your entire basis is deducted in year one, and years two through six show zero. Total tax savings across all 6 years stays the same either way, since the full basis eventually gets deducted regardless. Bonus depreciation only changes when you get the savings, not how much you get in total. Run the rebate plus MACRS combined tool if you're also stacking a state or utility rebate on top, and the rebate plus ITC combined calculator in our rebates and incentives section for the federal credit piece.
What this calculator doesn't account for
This model uses federal MACRS rules only. Several states don't fully conform to federal bonus depreciation and calculate state depreciation on a different schedule, so your actual state tax savings may differ from what's shown here. The Tax Foundation's state-by-state conformity analysis lists which states currently follow the federal 100% rate and which require a separate state depreciation schedule instead. Confirm your state's specific rules with a tax advisor, and pair this result with the payback calculator for the full year-one recovery picture, or the bonus depreciation calculator to see the election options side by side.