Tax Incentives

Tax Codes

Under section 179 amendments, eligible property placed in service after September 8, 2010 and before January 1, 2012 qualifies for up to 100% first year bonus depreciation. For 2012, bonus depreciation is still available, but the allowed deduction reverts from up to 100% to 50% of the eligible basis. Depreciable property that is not eligible for a section 179 deduction is still deductible over a number of years through MACRS depreciation according to sections 167 and 168. The 179 election is NOT mandatory, and the eligible property may be depreciated according to section 167 and 168 if preferable for tax reasons. MACRS stands for Modified Accelerated Cost-Recovery System; it was established in 1986 for businesses to recover investments in certain property through depreciation deductions. The MACRS specifies a number of renewable technologies that qualify for a 5 year depreciation schedule. These technologies include but are not limited to solar-electric and solar-thermal technologies, fuel cells and microturbines, geothermal electric, and combined heat and power.

Section 179

Section 179 allows businesses to deduct the full purchase price of qualifying equipment purchased or financed during the tax year. This section was created as an incentive by the U.S. Government to encourage businesses to buy equipment and invest in themselves.

For tax years beginning after 2017, the TCJA increased the maximum Section 179 expense deduction from $500,000 to $1 million. The phase-out limit increased from $2 million to $2.5 million. These amounts are indexed for inflation for tax years beginning after 2018.

Jan 4, 2019 –  Section 179 is one million dollars for 2019, as stated in H.R.1, aka, The Tax Cuts and Jobs Act.The deduction limit for Section 179 is $1,000,000 for 2019 and beyond, while the limit on equipment purchases remains at $2.5 million. The bonus depreciation is 100% and is retroactive to 9/27/2017. It is good through 2022. The bonus depreciation also now includes used equipment.

The IRS released Fact sheet FS-2018-9 provides info on Section 179 deductions including temporary 100 percent bonus depreciation, changes to depreciation limitations on vehicles used for business, new treatment of farm equipment, and the recovery period for real property.

For more information on the tax incentives & benefits please visit www.irs.gov.

Section 48

Internal Revenue Code (IRC) Section 48 provides an investment tax credit (ITC) for certain energy-related investments. The incentive was enacted in 1978 and has been substantially modified over time. Under current law, the ITC for most non-solar technologies will expire at the end of 2021. On February 9, 2018, the Bipartisan Budget Act of 2018, Pub. L. 115-123, Div. D, Title I, § 40411, 132 Stat. 150 (BBA 2018), modified the ITC under § 48 by replacing the requirement to place energy property in service by a certain date with a requirement to begin construction by a certain later date. Prior to the modification, energy property was required to be placed in service by a certain date (before January 1, 2016, or January 1, 2017, depending on the type of energy property). As modified, construction of energy property must begin before January 1, 2022.

This modification has the effect of  retroactively extending by five years the ITC for fiber-optic solar, qualified fuel cell, qualified micro-turbine, combined heat and power system (CHP), qualified small wind, and geothermal heat pump property the construction of which begins before January 1, 2022.

The amendments also phase out the ITC for fiber-optic solar, qualified fuel cell, and qualified small wind energy property over five years. For these energy properties, regardless of when construction begins, the projects must be placed in service before January 1, 2024.

For more information on the tax incentives & benefits please visit www.irs.gov. The information above is based on commercial guidelines because of changes in tax laws. Please be sure to consult with your tax professional to see how these tax incentives may apply.