Depreciation of Solar Energy Property in MACRS

The 50% first-year bonus depreciation allowance was further extended for property placed in service during 2013 by the American Taxpayer Relief Act of 2012 (H.R. 8, Sec. 331) in January 2013. If a system costs $100,000, the customer will receive a $30,000 tax credit the first year, resulting in an effective cost of $70,000 for the system. However, the MACRS cost basis will actually be $85,000 (assuming no incentives other than the federal tax credit were applied) €$85,000 is the amount that can be depreciated over 6 years. 50% of $85,000 will be deducted in year 1 and for the rest of the 50%, the depreciation factors for those 6 years are 20%, 32%, 19.2%, 11.52%, 11.52%, and 5.76%. (Note that they add up to 100% resulting in full depreciation after 6 years.)