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Arcman Solar Power Corp.        

14 Mica Lane, Suite 10, Wellesley MA 02481; Toll Free: 888-666-1016, 888-666-1013; Fax: 617-328-6332; Email:
American Recovery and Reinvestment Act of 2009
American Recovery and Reinvestment Act of 2009 was signed by President Obama on February 17, 2009. See U.S. Department of Treasury

Solar Grants Equal to 30% of the Cost of Commercial Solar Projects Started in the Next Two Years
For 2009 and 2010, solar projects that are eligible for depreciation or amortization (typically for corporate tax) can receive a 30% upfront cash grant in lieu of the 30% federal tax credit. The 30% tax credit for residential solar systems remains unchanged. The Treasury Department will administer the grant program and is required to pay out each grant within 60 days of the receipt of each application. The grant is not subject to federal taxes and the same eligibility of the business investment tax credit applies, which in particular means that governmental and non-tax entities are not eligible. Almost all solar applications should be eligible with the single exception being swimming pool heating. It is anticipated that guidance and application materials will be made available for this program no later than July 2009.

50% bonus depreciation for Business
For 2009 and 2010 solar projects, commercial businesses can claim 50% bonus tax depreciation expense for income tax deduction. The remaining 50% of the tax depreciation basis is expensed according to the 5-year MACRS schedule. The depreciation basis is still 85% of the total system cost (the total system cost less one half of the 30% federal grant or federal tax credit. See SEIA guide below for calculation). This means 51% of the total system cost can be accounted as income tax deduction in the first year. If federal corporate tax rate is 35%, then 18% total system cost can accounted as federal tax credit from depreciation in the first year.

For example, assume a business acquires a 100KW solar system with total installed cost $1,000,000. The tax depreciation benefits will be as follows

Five Year MACRS With 50% Bonus
Year % Depreciation Tax Depreciation Basis Tax Deduction Amount
Bonus 50% $850,000 $425,000
1 20% $425,000 $85,000
2 32% $425,000 $136,000
3 19.20% $425,000 $81,600
4 11.52% $425,000 $48,960
5 11.52% $425,000 $48,960
6 5.76% $425,000 $24,480

30% Investment Tax Credit(ITC) for Residential and Commercial Solar Systems
  • There is no maximum credit limits.
  • The home served by the residential system does not have to be the taxpayer’s principal residence.
  • Systems must be placed in service on or after January 1, 2009, and on or before December 31, 2016
  • Both Commercial and Residential now have AMT relief.
  • Based on the American Recovery and Reinvestment Act of 2009, subsidized energy financing will no longer impact the calculation of the ITC
Certain financial incentives may reduce the cost basis on which the 30% ITC is calculated, depending on whether or not these incentives are considered taxable income for the homeowner or business. For a residential project, if the homeowner’s tax bracket is under 30%, they would probably prefer to pay tax on the rebate and enjoy a larger tax credit. This is generally even more important for commercial projects because the larger ITC cost basis also yields more net depreciation benefit.

SEIA Guide to Federal Tax Incentives for Solar Energy

ITC Frequently Asked Questions

Energy Financial Incentives Available in Massachusetts

For more detailed information concerning the residential renewable energy tax credit, follow this link to the Database of State Incentives for Renewables & Efficiency