Quick definition
Businesses can generally deduct the cost of equipment they use to generate income, but the timing of that deduction depends on the depreciation method used. MACRS is the federal tax framework that classifies qualifying solar equipment on a short, five-year depreciation schedule for a commercial asset. In practice, most commercial solar projects today don't spread that deduction across the full five years: the One Big Beautiful Bill Act, signed July 4, 2025, restored 100% first-year bonus depreciation on top of the MACRS schedule for qualifying property acquired after January 19, 2025, letting a business write off the entire depreciable cost in year one rather than over time.
This is a business tax provision, not something available to a homeowner's personal residential system.
At a glance: MACRS is frequently combined with the Investment Tax Credit on the same commercial solar project, together forming two of the largest federal incentives supporting business solar investment; when both are claimed together, the depreciable basis used for bonus depreciation is reduced by half of the ITC amount claimed.
Why it matters
For a business evaluating a solar investment, MACRS combined with current bonus depreciation rules can meaningfully change the real, after-tax cost of the project. Because the deduction reduces taxable income, and current law lets most of that deduction be taken in the first year rather than spread out, a business in a healthy tax position can recover a substantial portion of a system's cost through tax savings almost immediately, well before the system has even paid for itself through energy savings alone.
This is exactly why MACRS and bonus depreciation together are such a central part of commercial solar financial modeling, distinct from residential solar economics where neither applies. A commercial solar proposal that only shows energy bill savings, without factoring in this tax benefit, is leaving out a genuinely significant part of the real financial picture for a business considering the investment. For the numbers behind MACRS depreciation, the rebate stacking tool in our Rebates & Incentives section walks through the calculation step by step.
The specific rules have changed materially with recent tax legislation and could change again. The One Big Beautiful Bill Act made 100% bonus depreciation permanent for now, with no scheduled phase-down, but tax law is never permanent in the everyday sense of the word. This is exactly the kind of detail where current federal guidance and a tax professional's input matter more than a general explanation, since the numbers that apply to a specific business and tax year can shift. DSIRE's database of state and federal incentives lists the tax treatments that apply to commercial solar, state by state.
Where you'll see this
The MACRS depreciation schedule calculator works out the year-by-year depreciation deduction for a specific commercial solar investment.
Since MACRS and other incentives often stack on the same project, the commercial solar rebate plus MACRS combined tool models the total combined benefit.
This term comes up in every commercial and industrial solar financial proposal, in business tax planning conversations, and any detailed comparison of the true after-tax cost of a commercial solar investment. The Department of Energy's page on what changed for the solar tax credit explains the current federal rules for business-owned systems.
Frequently asked
No, MACRS is a business tax provision that applies to solar equipment used in a trade or business, not to a homeowner's personal residential system. Residential owners benefit from the Investment Tax Credit instead, not MACRS depreciation.
Yes, both incentives can generally apply to the same commercial solar system, though the depreciable basis is typically reduced by a portion of the ITC claimed, a detail worth confirming with a tax professional rather than assuming full stacking.
The savings depend on the business's tax bracket and the specific bonus depreciation rules in effect at the time of the investment. As of the One Big Beautiful Bill Act, qualifying property acquired after January 19, 2025 generally gets 100% bonus depreciation, meaning the entire depreciable basis can be written off in the first year rather than spread over five years. It's a genuinely significant incentive for many commercial solar projects, but the exact dollar value should be calculated for the specific business and current tax rules.
Depreciation reduces taxable income, so its immediate value depends on the business having taxable income to offset in that period. A business with limited current profitability may see less immediate benefit, though depreciation rules around carrying losses forward can still apply in some cases.