Commercial Tax Incentives
Federal and state tax incentives can save your business up to 90% on a solar energy system installation. From simply an economic standpoint, that makes Hawaii one of the best places in the nation for solar. In addition, Hawaii has the highest utility rates in the country and is the third sunniest state. When the energy savings are added to the tax incentives your system in most cases will pay for itself in two to four years. At RevoluSun, we help your business maximize available tax credits, greening your business in more ways than one.
Investment Tax Credit (ITC)—The ITC allows businesses to take 30 percent of the installed cost of your PV system as a non-refundable credit against your overall tax liability. The credit is uncapped and can roll forward up to 20 years or back one year. Starting in the 2017 tax year, the ITC drops to 10 percent. Modified Accelerated Cost Recovery Program (MACRS)–Under the MACRS accelerated depreciation schedule you can write off 85 percent of your total project cost over six years. An additional “bonus depreciation” provision allows 60 percent of that adjusted cost basis amount to be taken against your taxes in Year 1. By providing this opportunity to accelerate the loss, the government is encouraging businesses to purchase capital equipment now instead of later.
The state of Hawaii offers the Renewable Energy Technologies Income Tax Credit (RERITC) with two different options:
Option 1—Non-Refundable Credit— This credit is worth 35 percent of the installed cost. There is no basis reduction and the unused portion rolls forward after applying it against taxes owed. This credit can be difficult for some companies to monetize because it usually substantially exceeds the state corporate tax liability for a single year.
Option 2—Refundable Credit— This credit is worth 24.5 percent of the installed cost and pays you cash for any amount left over after it has been applied to your tax bill. An important note: If you have pension income or low income, you can take the 35 percent as refundable, making this a good option for retirees.
Standard Modified Accelerated Cost Recovery Program (MACRS)–Under Hawaii’s MACRS accelerated depreciation schedule you can write off 100 percent of your total project cost over six years. There is no “bonus depreciation” provision on the state level, but this schedule allows 20 percent of the project cost to be taken in Year 1 and 32 percent to be taken in Year 2.