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MACRS Depreciation (Solar) Calculator

Accelerated depreciation schedule for solar assets.

About this calculator

Commercial solar assets have long qualified for 5-year MACRS accelerated depreciation under Table B-2 of IRS Publication 946 (asset class "energy property described in section 48(a)(3)(A)"), but the depreciable basis isn't the full project cost — IRC Section 50(c)(3) requires reducing it by half of whatever Investment Tax Credit is claimed, since the ITC itself is treated as a tax-free return of basis. This calculator applies that 50% basis-reduction rule first, then depreciates what's left using the standard half-year-convention 5-year MACRS percentages (20%, 32%, 19.2%, 11.52%, 11.52%, 5.76% across six tax years) published in IRS Pub. 946's Table A-1. Note that this 5-year classification applies to solar property the construction of which began before January 1, 2025: a 2025 tax law (P.L. 119-21, § 70509) removed solar and wind energy property from the definition of 5-year property for construction beginning after that date, so confirm your project's construction-start date against current guidance before relying on the 5-year schedule modeled here.

If you enter a bonus depreciation percentage, that share of the basis is pulled out and expensed entirely in year one, with only the remaining basis running through the MACRS schedule — so a 60% bonus year still has real depreciation left to claim in years two through six, it isn't all front-loaded. Each year's depreciation is converted to a tax-savings dollar figure using a combined federal-plus-state rate (state tax is treated as deductible from federal, which is why it's blended rather than simply added), and those savings are also discounted to a net present value at a fixed 7% rate so you can compare the depreciation benefit against the upfront ITC on equal footing. The bottom-line "effective net cost" nets the ITC and the NPV of depreciation savings off the project cost. This is a planning estimate, not tax advice: actual bonus depreciation percentages phase down by tax year under current law, and your specific entity's tax position (passive-loss limits, AMT, tax-equity partnership allocations) can materially change how much of this benefit you can actually use.

Inputs

%

Results

Year 1 tax savings ($)

$332,350.00

≈ 8 Teslas

Depreciable basis ($)$1,700,000.00
Year 1 depreciation ($)$1,156,000.00
Total depreciation ($)$1,700,000.00
Total tax savings ($)$488,750.00
NPV of tax savings ($)$436,633.00
ITC credit amount ($)$600,000.00
Effective net cost ($)$963,367.00
Cost reduction (%)51.8%

Figures current as of 2026. Sources: IRS Publication 946, "How To Depreciate Property" (Table B-2, asset class for energy property described in IRC § 48(a)(3)(A); Table A-1), 26 U.S.C. § 50(c)(3), Pub. L. No. 119-21, § 70509 (2025), amending IRC § 168(e)(3)(B)(vi)

How to Use This Calculator
  1. Enter the total installed project cost and the applicable ITC rate.
  2. Set the bonus depreciation percentage for the applicable tax year.
  3. Enter federal and state marginal income tax rates.
  4. Review Year 1 tax savings and the NPV of depreciation tax savings.
  5. Use the effective net cost and cost reduction percentage for project financial modeling.

How the result changes with Total project cost ($)

Total project cost ($)Year 1 tax savings ($)
1,000,000$166,175.00
1,500,000$249,262.00
3,000,000$498,525.00
5,000,000$830,875.00

What each input means

Total project cost ($)
Total installed cost of the solar project.
ITC rate (decimal)
Federal ITC rate as a decimal (0.30 = 30%).
Bonus depreciation (%)
Year-1 bonus depreciation percentage. 80% for 2023, 60% for 2024, 40% for 2025, etc.
Federal marginal tax rate
Federal corporate or individual marginal income tax rate.
State tax rate
State income tax rate (deductible from federal, so net impact is combined).

What each result means

Year 1 tax savings ($)
Tax savings from Year 1 depreciation including bonus.
Depreciable basis ($)
Basis after ITC 50% reduction.
Year 1 depreciation ($)
Depreciation deduction in year 1 (bonus + MACRS).
Total depreciation ($)
Sum of all depreciation over 6 tax years.
Total tax savings ($)
Undiscounted total tax savings from depreciation.
NPV of tax savings ($)
Net present value of depreciation tax savings at 7% discount rate.
ITC credit amount ($)
Federal Investment Tax Credit value.
Effective net cost ($)
Project cost minus ITC minus NPV of depreciation savings.
Cost reduction (%)
Percentage of project cost offset by ITC + depreciation.

How this is calculated

Worked example, using the default values

  1. Identify Input Parameters
    4 parameters
    Total project cost ($) = 2000000, ITC rate (decimal) = 0.3, Bonus depreciation (%) = 60, Federal marginal tax rate = 0.25 = 5 input(s) provided
  2. Calculate Year 1 tax savings
    Year 1 tax savings = year1Depreciation * combinedTaxRate
    332350 = $332,350
  3. Calculate Depreciable basis
    Depreciable basis = projectCost - basisReduction
    1700000 = $1,700,000
  4. Calculate Year 1 depreciation
    1156000 = $1,156,000

Figures and sources

Engine last updated . Checked against 2 independently-derived tests — how we verify calculators. Built by Paul Gunder, a software engineer, not a licensed financial, medical, or legal professional.

Frequently Asked Questions

Why does the depreciable basis only get reduced by half of the ITC, not the full credit amount?

IRC Section 50(c)(3) provides that only 50% of an energy credit is taken into account when reducing basis under the general Section 50(c)(1) rule, so only half of the ITC amount has to come out of the depreciable basis. This calculator applies that exact rule: it computes the ITC amount from your project cost and rate, takes half of it as the basis reduction, and depreciates what's left through the 5-year MACRS schedule.

Is solar still 5-year MACRS property under current law?

It is for solar property that began construction before January 1, 2025, which is what this calculator assumes — that classification is set out in IRS Publication 946's Table B-2 (asset class for "energy property described in section 48(a)(3)(A)"). A 2025 tax law (P.L. 119-21, § 70509) removed solar and wind energy property from the 5-year property definition for property that begins construction after December 31, 2024, so a newer project should be checked against current IRS guidance rather than assumed to follow the schedule modeled here.

How does bonus depreciation interact with the regular MACRS schedule instead of replacing it?

The bonus percentage you enter is carved out of the depreciable basis first and expensed entirely in year one. Only the remaining, smaller basis then runs through the six-year MACRS percentage schedule (20%, 32%, 19.2%, 11.52%, 11.52%, 5.76%), so even at a 60% bonus rate there's still real depreciation to claim in years two through six — bonus depreciation shrinks the remaining schedule, it doesn't eliminate it.

Why does the calculator blend federal and state tax rates instead of just adding them together?

State income tax is generally deductible on your federal return, so simply adding the two rates would overstate your real combined tax burden. The formula used here — marginal rate plus state rate times (1 minus marginal rate) — approximates that federal deduction, giving a combined rate that's slightly lower than a naive sum.

Why discount the depreciation tax savings to a net present value at 7%?

Depreciation tax savings arrive over six tax years, while the ITC is realized as a single lump sum, so comparing them dollar-for-dollar would overstate the depreciation benefit. Discounting each year's tax savings back to today's dollars at a 7% rate puts both incentives on equal footing before they're netted against the project cost to produce the effective net cost figure.

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