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ITC / MACRS Tax Incentive Calculator

Federal ITC · 5-Year MACRS Depreciation

When to use: Estimating the after-incentive cost of a commercial solar PV system. The federal Investment Tax Credit (IRC §48) provides a credit of 30% of installed cost, and 5-year MACRS depreciation accelerates the tax shield. Note the depreciable basis is reduced by 50% of the ITC. Optional bonus depreciation is taken in Year 1.

Project & Tax Parameters
$
default 30
%
depreciation shield
%
Year 1 · default 0
%
Calculation Steps
ITC = $250,000 × 30% = $75,000
Basis = cost − (ITC ÷ 2) = $212,500
Net cost = cost − ITC − shield = $130,375
5-Year MACRS Schedule
YearDepreciationTax Shield
Year 1 (20.00%)$42,500$8,925
Year 2 (32.00%)$68,000$14,280
Year 3 (19.20%)$40,800$8,568
Year 4 (11.52%)$24,480$5,141
Year 5 (11.52%)$24,480$5,141
Year 6 (5.76%)$12,240$2,570
Net Cost After Incentives
$130,375
After ITC + depreciation tax shield
Results
Installed Cost$250,000
ITC (30%) Amount$75,000
Depreciable Basis$212,500
Total Depreciation Tax Shield$44,625
Net Cost After Incentives$130,375
Effective Incentive %47.9%
References
IRC §48 — Investment Tax Credit
MACRS 5-yr (IRS Pub 946)
Basis reduced by 50% of ITC
Consult a tax professional