With regulations constantly evolving, businesses are always looking for new ways to invest and save money—and we’re here to help our solar customers do just that. Thankfully, this year there is a handy piece of legislation titled "Section 179." New limits for Section 179 took effect on January 1, 2017 and provides an opportunity for businesses to take advantage of a deduction on eligible property early rather than spreading out depreciation over the useful lifetime, allowing the full purchase price up to $500,000 to be deducted from gross income.
Spend between $500,000 and $2,000,000 on qualifying business equipment and you are entitled to these savings in full. The $2,000,000 spending cap makes Section 179 a true "small and medium business tax incentive" because larger businesses that spend $2.5 million or more on equipment will not be eligible.
The $500,000 deduction begins to phase out dollar-for-dollar once the $2,000,000 has been reached. For example—If you spend $2.1 million on a new solar installation, you’re eligible up to $400,000 in savings. Any amount over $500,000 is still allowed to use “bonus depreciation”. The Section 179 cap will also be subject to inflation in $10,000 increments in future years.
Previously, solar had to be live or interconnected between January 1st and the end of the day on December 31st. However, new limits now allow customers to claim in for the 2018 tax year as well.
Businesses that purchase, finance, or lease less than $2,000,000 in new or used business equipment in tax year 2017 should qualify for Section 179’s full deduction.
Bonus depreciation is generally taken after the Section 179 spending cap is reached. Businesses of all sizes will be able to depreciate 50% of eligible amounts within the first year. This applies to systems placed in service during 2015, 2016 and 2017. Then bonus depreciation will phase down to 40 percent in 2018 and 30 percent in 2019.
Please note—bonus depreciation is available for new equipment only; used equipment qualifies for Section 179 deduction, but does not qualify for bonus depreciation.