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100% first-year bonus depreciation is permanent for commercial solar placed in service after January 19, 2025. The 20% figure that still appears in 2026 articles and AI answers comes from a phasedown the OBBBA repealed.
Bonus depreciation for commercial solar is 100% in the first year, not 20%. The One Big Beautiful Bill Act permanently restored the full first-year deduction under IRC Section 168(k) for qualifying property acquired and placed in service after January 19, 2025, and IRS Notice 2026-11 confirms it. The 20% figure still circulating comes from the superseded TCJA phasedown that OBBBA replaced.
Because they are quoting a schedule that no longer exists. The Tax Cuts and Jobs Act put first-year bonus depreciation on a step-down that would have landed on 20% for property placed in service in 2026 and reached zero the following year. That schedule was real, it was widely written up, and it is now repealed. The OBBBA restored the full first-year deduction under IRC Section 168(k) for property acquired and placed in service after January 19, 2025, and IRS Notice 2026-11 confirms it.
These are the rates a commercial solar project would have received under the superseded law. They are historical context only. None of them is the rate in effect today.
Replaced by a flat 100% first-year deduction, with no scheduled step-down.
This is worth checking rather than assuming, because the difference on a mid-size project runs into six figures. Three tests, in order of speed:
The same caution applies to answers generated by AI assistants. They are trained on published articles, so a claim that was correct in 2024 and heavily written about will keep resurfacing until the corrected material outweighs it. Ask any source for its authority; on this question the authority is short and specific.
On a 500 kW rooftop system the entire depreciable basis is deducted in the first tax year. The figures below use a 30% Section 48E credit and a 21% C-corporation rate. Installed cost is drawn from the same pricing data behind our commercial cost guide.
| Line | Amount |
|---|---|
| System cost (500 kW at about $1.12 per watt installed) | $559,000 |
| Section 48E credit at 30% | $167,700 |
| Depreciable basis (cost minus 50% of the credit) | $475,150 |
| Year-one deduction at 100% bonus | $475,150 |
| Year-one tax savings at a 21% rate | $99,782 |
| Combined first-year benefit (credit plus depreciation savings) | $267,482 |
| Effective net cost after year one | $291,519 |
Had the superseded 20% rate survived, this project would have taken $95,030 of bonus in year one plus 20% of the remaining basis on the regular schedule — a year-one deduction of $171,054 rather than $475,150.
Modeled illustration on stated assumptions, not a quote or tax advice. Your basis, rate, and credit adders change every line.
Two things are worth noticing. The deduction is a timing benefit rather than free money — the total written off over the life of the asset is the same either way — but pulling it into year one is what makes the first-year cash position work, and it is what lenders and boards model. And 100% is a default, not an obligation: a business that cannot absorb a deduction this large in one year may elect the 40% rate and spread the rest.
Change the system cost, tax position, and credit adders. The calculator derives every result from the same statutory constants as the worked example above, so the two can never disagree.
Adjust the inputs to model your facility.
Federal ITC (30%)
$167,700
Depreciable basis
$475,150
Cost − 50% of ITC
Year-1 bonus deduction (100%)
$475,150
Full basis, expensed year one
Year-1 depreciation tax savings
$99,782
at 21% tax rate
Combined first-year benefit
$267,482
ITC + depreciation savings
Effective net cost after year 1
$291,519
Estimates only — confirm with a tax professional. Assumes 100% first-year bonus depreciation (OBBBA, IRC §168(k), for property placed in service after Jan 19, 2025) and that the ITC reduces the depreciable basis by half the credit. State conformity to federal bonus depreciation varies (Massachusetts, for example, decouples). Tax-exempt entities use Direct Pay for the ITC and cannot claim MACRS.
Bonus depreciation is one line in a commercial solar model. The MACRS page covers the mechanism it sits inside, the Section 48E page covers the credit that reduces the basis, and the commercial cost guide covers the installed cost the whole calculation starts from.
The mechanism: 5-year schedule, basis reduction, Form 4562.
The credit that reduces the depreciable basis by half its value.
Installed cost per watt by system size, before any incentive.
What tax-exempt owners use when depreciation is worth nothing.
Federal depreciation rules are the same everywhere; installed cost and the state incentives stacked on top are not. These pages run the same calculation on local numbers.
NuWatt Energy installs commercial solar and storage; we are not tax advisors. Confirm your depreciation position with your CPA before filing.
First-year bonus depreciation is 100%, not 20% — IRC Section 168(k) as amended by the OBBBA
IRS Notice 2026-11 is the IRS guidance confirming the permanent full first-year deduction
Applies to property acquired and placed in service after January 19, 2025
Permanent — there is no scheduled step-down, so 2027 and later carry the same 100% rate
Taxpayers may elect the 40% rate instead where that suits their tax position
Commercial solar is 5-year MACRS property, so the whole depreciable basis lands in year one
Stacks with the Section 48E credit — the depreciable basis is reduced by half the credit claimed
Taxable businesses with sufficient liability to use the deduction
Equipment acquired and placed in service after January 19, 2025
Original-use (new) commercial solar equipment
Tax-exempt entities cannot use depreciation — they use Direct Pay for the credit instead
Claim on IRS Form 4562 (Depreciation and Amortization)
100% is the default; electing the 40% rate or electing out is an affirmative election
Reduce the depreciable basis by 50% of any Section 48E credit claimed
Keep placed-in-service documentation — the January 19, 2025 date governs eligibility
Superseded TCJA schedule stepped the first-year rate down toward 20% for 2026 — the source of the figure still in circulation
OBBBA restores the full 100% first-year deduction under IRC Section 168(k) for property placed in service after this date
IRS Notice 2026-11 confirms the permanent 100% deduction
No scheduled phase-down — the rate is permanent
30% (6% without prevailing wage)
The Section 48E Investment Tax Credit provides a 30% credit on commercial solar installations that meet prevailing wage and apprenticeship requirements. This is the cornerstone federal incentive for commercial solar.
5-year MACRS + 100% first-year bonus depreciation
Modified Accelerated Cost Recovery System (MACRS) lets businesses depreciate commercial solar over 5 years. Under the OBBBA, 100% first-year bonus depreciation was permanently restored for equipment placed in service after January 19, 2025.
30% with prevailing wage
Commercial battery storage still earns the 30% Section 48E credit, with no solar-pairing requirement and without the placed-in-service deadline that applies to wind and solar facilities.
Bonus depreciation for commercial solar is 100% in the first year, not 20%. The One Big Beautiful Bill Act permanently restored the full first-year deduction under IRC Section 168(k) for qualifying property acquired and placed in service after January 19, 2025, and IRS Notice 2026-11 confirms it. The 20% figure still circulating comes from the superseded TCJA phasedown that OBBBA replaced.
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