This blog focuses on Depreciation changes affecting solar installations for businesses. Click Here for more information on the Residential Energy Credit (Section 25D) changes for homeowners. Click Here for more information on the Commercial ITC changes for business owners.
The OBBB signed into law by President Trump on July 4, 2025, fundamentally alters the depreciation landscape for solar energy systems. The legislation eliminates a long-standing favorable depreciation treatment while simultaneously restoring another powerful depreciation benefit. Understanding these changes is crucial for business owners planning solar installations.
The Elimination: The OBBB eliminates the five-year Modified Accelerated Cost Recovery System (MACRS) designation for energy property under Section 168(e)(3)(B)(vi) with respect to solar, wind, and energy storage technology facilities under Section 48, where construction began after December 31, 2024.
What This Means:
The Restoration: While eliminating 5-year MACRS, the OBBB restores and makes permanent 100% first-year bonus depreciation for qualified property acquired and placed in service after January 19, 2025. This provision extends before January 1, 2030 (and before January 1, 2031, for some types of property with longer production periods).
What 100% Bonus Depreciation Means:
When considering the transition to solar or other capital investments, business owners should take a strategic approach to tax planning—particularly when it comes to 100% bonus depreciation. One of the key advantages is the ability to receive immediate tax relief, significantly improving cash flow by allowing a full deduction of qualifying asset costs in the first year. This front-loaded benefit also simplifies tax planning and can be especially valuable for profitable businesses with high tax liabilities.
However, there are potential challenges to keep in mind. To take full advantage of 100% bonus depreciation, a business must have sufficient taxable income in the same year, which may limit its usefulness for those with lower current profitability. Additionally, this approach could affect tax planning in future years. Business owners should evaluate both current and projected taxable income, carefully consider the timing of equipment acquisition and when it’s placed in service, and assess whether taking the full depreciation up front or spreading it out better aligns with long-term tax strategies.
To qualify for 100% bonus depreciation, businesses must ensure that the property meets specific criteria. Eligible assets include solar panels, mounting systems, inverters, and energy storage systems that are installed as part of a solar project. Installation labor and related equipment also fall under qualifying expenses.
Combined Benefits: Businesses can potentially utilize both the 30% Investment Tax Credit and 100% bonus depreciation, though the depreciation basis must be reduced by half of the ITC amount claimed.
Example Calculation:
Immediate Actions:
The Bottom Line
The OBBB creates a unique opportunity for businesses to potentially achieve greater tax benefits through 100% bonus depreciation than the previous 5-year MACRS system, but only for a limited time. The key is having sufficient taxable income to utilize the immediate deduction and acting within the specified timeframes.
For many profitable businesses, the combination of the 30% ITC and 100% bonus depreciation can provide substantial immediate tax relief, potentially making solar investments more attractive than ever—but only until the January 1, 2030 deadline.
Important Disclaimer
Harvest Solar is not a tax advisory firm or legal counsel. This information is provided for general educational purposes only. Depreciation rules and tax law interpretation can be complex and may evolve as new regulations and guidance are developed. The interaction between bonus depreciation, the Investment Tax Credit, and your specific business tax situation requires careful analysis. We strongly recommend consulting with qualified tax professionals and CPAs who specialize in renewable energy tax law to understand how these changes specifically impact your business and to develop an optimal tax strategy for your circumstances.