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Get a Free QuoteModel your year-by-year depreciation schedule with ITC stacking, 100% first-year bonus depreciation, and entity-type comparison. Connecticut conforms to federal bonus depreciation — maximizing Year 1 tax savings at the combined 28.5% rate.
MACRS Schedule
5 Years
Accelerated depreciation
Bonus Depreciation
100%
Full Year 1 deduction
ITC Stacking
30-70%
Section 48/48E credit
CT Corporate
7.5%
On top of 21% federal
A Connecticut C-corp installing a $200,000 commercial solar system can deduct the full $170,000 depreciable basis in Year 1 with 100% first-year bonus depreciation (permanent under OBBBA). At a 28.5% combined tax rate (21% federal + 7.5% CT), that is $48,450 in Year 1 depreciation savings, plus a $60,000 ITC credit — totaling roughly $108,450 in first-year tax benefits. Because the full basis is expensed up front, total depreciation tax savings of about $48,450 all land in Year 1. Unlike Massachusetts, Connecticut conforms to federal bonus depreciation, so state and federal schedules are identical — maximizing the front-loaded benefit.
The Modified Accelerated Cost Recovery System (MACRS) allows Connecticut businesses to recover the cost of commercial solar systems through accelerated tax deductions over just 5 years. This is dramatically faster than the 25-30 year useful life of solar panels, front-loading tax benefits into the years when they matter most for cash flow and project economics.
For Connecticut businesses paying $0.221/kWh average (with blended rates of $0.27-$0.30/kWh including demand charges), MACRS creates a powerful second income stream on top of electricity cost avoidance. Connecticut's commercial electricity rates are among the highest in the nation, and the combination of accelerated depreciation deductions with the Section 48 Investment Tax Credit means a well-structured commercial solar project can recover 40-60% of its cost in Year 1 alone through tax benefits.
The 5-year MACRS schedule uses the 200% declining balance method, which concentrates deductions in the early years. The standard percentages are: Year 1 (20%), Year 2 (32%), Year 3 (19.2%), Year 4 (11.52%), Year 5 (11.52%), and Year 6 (5.76%). Note that 5-year property actually spans 6 tax years due to the half-year convention — the IRS assumes you placed the asset in service at the midpoint of Year 1, so a half-year of depreciation extends into Year 6.
A critical advantage for Connecticut businesses: CT conforms to federal bonus depreciation. This means the 100% first-year bonus depreciation applies on both your federal return and your CT corporate business tax return. States like Massachusetts do not conform, requiring businesses to add back the bonus on state returns. In Connecticut, the state and federal MACRS schedules are identical, simplifying tax planning and maximizing the front-loaded Year 1 benefit.
MACRS is a tax deduction that reduces taxable income. The ITC is a tax credit that reduces tax owed dollar-for-dollar. A $100,000 deduction at a 28.5% combined CT rate saves $28,500, while a $100,000 credit saves the full $100,000. Both stack on the same system — the only interaction is that the depreciable basis is reduced by 50% of the ITC claimed.
The Tax Cuts and Jobs Act (TCJA) established 100% bonus depreciation, then scheduled a phase-down of 20 percentage points per year (80% in 2023, 60% in 2024, 40% in early 2025). OBBBA reversed that: under IRC §168(k), 100% first-year bonus depreciation is permanently restored for property placed in service after January 19, 2025 — on top of the regular MACRS framework, with no scheduled phasedown. A business can deduct the entire adjusted depreciable basis in Year 1.
2023
80%
Expired
2024
60%
Expired
Early 2025
40%
Expired
OBBBA
100%
Current
2026
100%
Current
2027+
100%
Current
The math is straightforward: with a $170,000 depreciable basis, 100% first-year bonus depreciation lets you deduct the entire $170,000 in Year 1. At a 28.5% combined tax rate (CT C-corp), that is $48,450 in Year 1 tax savings, front-loaded into the year the system is placed in service rather than spread across the standard 5-year schedule. For pass-through entities at higher marginal rates, the Year 1 benefit is even larger.
Because Connecticut conforms to federal bonus depreciation, CT businesses receive this bonus on both their federal and state tax returns. The $170,000 Year 1 deduction saves $35,700 on the federal return (at 21%) plus $12,750 on the CT corporate return (at 7.5%) — a total of $48,450 from depreciation in Year 1. In non-conforming states, the state portion of this savings would be deferred across the full 5-year schedule.
Bonus depreciation is based on when the system is placed in service — meaning fully installed, interconnected, and operational — not when the contract is signed or construction begins. The 100% first-year bonus applies to property placed in service after January 19, 2025, and the deduction is claimed in the tax year the system goes into service. For commercial installations that take 3-6 months in CT, plan the schedule so the system is placed in service in the year you want the deduction. Eversource CT and UI interconnection timelines should be factored into your project schedule.
Below is the complete 5-year MACRS depreciation schedule for a $200,000 commercial solar system with a 30% ITC ($60,000 credit). The depreciable basis is $170,000 ($200,000 - $30,000). With 100% first-year bonus depreciation, Year 1 captures the full depreciable basis. Connecticut businesses benefit from identical state and federal schedules due to CT conformity.
Basis calculation: $200,000 system cost - ($60,000 ITC x 50%) = $170,000 depreciable basis
| Year | Standard % | With Bonus % | Deduction | Tax Savings (28.5%) | Cumulative |
|---|---|---|---|---|---|
| Year 1 | 20.00% | 100.00% | $170,000 | $48,450 | $48,450 |
| Year 2 | 32.00% | 0.00% | $0 | $0 | $48,450 |
| Year 3 | 19.20% | 0.00% | $0 | $0 | $48,450 |
| Year 4 | 11.52% | 0.00% | $0 | $0 | $48,450 |
| Year 5 | 11.52% | 0.00% | $0 | $0 | $48,450 |
| Year 6 | 5.76% | 0.00% | $0 | $0 | $48,450 |
| Total | $170,000 | $48,450 | -- | ||
The power of commercial solar tax benefits lies in stacking the Section 48/48E ITC with MACRS depreciation. Here is the complete calculation for a $200,000 system with 30% ITC, installed by a Connecticut C-corporation.
$200,000 x 30% = $60,000 tax credit
Dollar-for-dollar reduction in federal tax owed. Begin construction on or before July 4, 2026 to lock in the longer placed-in-service pathway; projects beginning later can still qualify but generally must be placed in service by December 31, 2027. Bonus adders (domestic content +10%, energy community +10%, low-income +10-20%) can push the ITC to 40-70%.
$200,000 - ($60,000 x 50%) = $170,000
Reduce total cost by half the ITC. This prevents double-dipping between the credit and the deduction. With a 50% ITC, the basis would be $200,000 - $50,000 = $150,000.
$170,000 x 100% = $170,000 deducted in Year 1
Under OBBBA (IRC §168(k)), the full depreciable basis is deducted in Year 1 — permanent, with no scheduled phasedown. Connecticut conforms: this bonus applies on both federal and CT returns. Remaining basis after bonus: $170,000 - $170,000 = $0.
$0 remaining basis x 20% = $0
With 100% bonus the depreciable basis is fully expensed in Year 1, so the standard 5-year MACRS percentages apply to a $0 remainder. Total Year 1 deduction: $170,000.
$60,000 ITC + ($170,000 x 28.5%) = $60,000 + $48,450 = $108,450
The ITC is a credit (dollar-for-dollar). The depreciation deduction is multiplied by the 28.5% combined rate (21% federal + 7.5% CT corporate). Year 1 total benefit = 54.2% of system cost.
| ITC Rate | ITC Amount | Depreciable Basis | Total MACRS Savings | Year 1 Total |
|---|---|---|---|---|
| 30% | $60,000 | $170,000 | $48,450 | $108,450 |
| 40% | $80,000 | $160,000 | $45,600 | $125,600 |
| 50% | $100,000 | $150,000 | $42,750 | $142,750 |
| 60% | $120,000 | $140,000 | $39,900 | $159,900 |
| 70% | $140,000 | $130,000 | $37,050 | $177,050 |
One of the most significant advantages for Connecticut businesses considering commercial solar is that CT conforms to federal bonus depreciation. This means the 100% first-year bonus applies identically on both your federal and Connecticut corporate business tax returns. Not all states provide this benefit — Massachusetts, for example, does not conform, requiring businesses to add back the federal bonus on their state returns.
The practical impact is substantial. Consider a $200,000 system with $170,000 depreciable basis. With 100% bonus, the full $170,000 is deducted in Year 1. In Connecticut, that $170,000 deduction reduces your CT corporate tax by $12,750 (at 7.5%) in Year 1. In a non-conforming state, that state-side savings would be spread across Years 1-6 instead of concentrated in Year 1. For cash-flow-conscious businesses, this front-loading of state tax savings can meaningfully improve project economics.
For a $200,000 system at 30% ITC with 100% bonus:
Connecticut also provides a 100% property tax exemption for commercial solar installations and a 6.35% sales tax exemption on solar equipment (via Form CERT-140). These exemptions stack with MACRS and the federal ITC, further improving the total return on investment. The property tax exemption is permanent, meaning your solar system never increases your property tax assessment regardless of the value it adds.
For businesses evaluating C-PACE financing through the CT Green Bank, the MACRS + ITC combination remains fully available as long as the business retains system ownership. C-PACE finances the upfront cost via a property tax assessment, but the business owner claims all federal and state tax benefits. This structure allows 100% financing with zero upfront cost while capturing the full $108,450 in Year 1 tax benefits on a $200,000 system.
The value of MACRS depreciation varies significantly by entity type. Connecticut's tax structure includes a 7.5% corporate business tax for C-corps and an optional pass-through entity tax (PET) at 6.99% for S-corps and multi-member LLCs. Understanding how depreciation deductions flow through each structure is essential for maximizing after-tax returns.
Maximum benefit. Deductions offset corporate income directly. Both ITC and MACRS claimed at entity level. CT conforms to federal bonus — identical schedule for state and federal.
Deductions pass through to shareholders on K-1. CT pass-through entity tax (PET) at 6.99% available as an election. Effective rate depends on each shareholder marginal bracket. Shown at max federal bracket.
Similar to S-corp. Depreciation allocated per operating agreement. Tax equity structures can optimize allocation to members with highest tax appetite. CT PET election available.
Deductions flow to Schedule C. Effective rate depends on owner total income. Passive activity rules may limit if solar is a separate activity. CT individual income tax up to 6.99%.
Cannot use MACRS (no taxable income). Must use PPA or lease where for-profit owner claims MACRS + ITC and passes savings through lower rates. C-PACE may still apply for financing.
Connecticut commercial solar pricing ranges from $1.20-$2.55/W depending on system size. Here are typical installed costs by tier:
Small (25-100 kW)
$2.10-$2.55/W
50 kW rooftop
Mid (100-500 kW)
$1.60-$1.90/W
250 kW commercial
Large (500 kW+)
$1.20-$1.50/W
1 MW ground-mount
Connecticut was the first state in the nation to establish a C-PACE program, administered through the Connecticut Green Bank. With over $400 million deployed and 140+ participating municipalities, C-PACE is the dominant commercial solar financing mechanism in CT. Understanding how C-PACE interacts with MACRS depreciation and the ITC is critical for structuring optimal deals.
The key principle: C-PACE is a financing tool, not an ownership structure. When a business uses C-PACE to finance a solar installation and retains ownership of the system, the business claims both the ITC and MACRS depreciation. The C-PACE assessment appears as a property tax item, repaid over 20-25 years at 5-7% interest rates, while the business captures the full $108,450 in Year 1 tax benefits on a $200,000 system.
A critical nuance: C-PACE financing costs are deductible as a business expense (interest portion) separate from MACRS depreciation. The principal portion of C-PACE payments is not deductible, but the MACRS depreciation on the system itself provides the equivalent tax benefit. This means a CT business using C-PACE effectively gets three layers of tax benefit: the ITC credit, MACRS depreciation deductions, and interest expense deductions on the C-PACE financing.
For more details on C-PACE program mechanics, eligibility, and the application process, see our comprehensive C-PACE guide for CT commercial solar. To model the full IRR including C-PACE financing costs, use our CT commercial solar IRR calculator.
Here are representative MACRS + ITC calculations for three common Connecticut commercial solar system sizes. All calculations assume 30% base ITC, 100% first-year bonus depreciation, and C-corp entity at 28.5% combined rate. Annual production assumes 1,175 kWh/kW/year — the CT average.
Installed cost: $112,500
Installed cost: $437,500
Installed cost: $1,350,000
The combination of factors makes the timing compelling: (1) 100% first-year bonus depreciation is permanent under OBBBA, (2) Section 48/48E ITC still available at 30-70% — begin construction on or before July 4, 2026 to lock in the longer placed-in-service pathway, (3) CT electricity rates at historic highs ($0.221/kWh+), (4) C-PACE financing available in 140+ municipalities, (5) CT property and sales tax exemptions fully in effect. The full depreciable basis is deducted in Year 1 — worth $48,450 in depreciation savings for a $200,000 system at the C-corp rate.
Complete guide to commercial solar in Connecticut: ITC, MACRS, C-PACE, net metering, and utility rate structures.
National MACRS depreciation guide with state-by-state conformity analysis and entity-type comparison.
Full IRR/NPV calculator combining ITC, MACRS, net metering, and CT tax exemptions. Cash vs C-PACE comparison.
How C-PACE works in Connecticut: 100% financing, CT Green Bank, 140+ municipalities, 20-25yr terms.
Model your facility's exact MACRS + ITC savings
Get a depreciation schedule built for your entity type, system size, and tax position.
The calculator takes your total system cost, subtracts 50% of the ITC claimed to get the depreciable basis, then applies the 5-year MACRS percentages (20/32/19.2/11.52/11.52/5.76%) to show year-by-year deductions. Under OBBBA (IRC §168(k)), 100% first-year bonus depreciation is applied in Year 1, so the entire depreciable basis is deducted up front. Connecticut conforms to federal bonus depreciation, so the state and federal schedules are identical — unlike Massachusetts, which does not conform.
Our team will model the exact depreciation schedule for your Connecticut business — including entity type, ITC adders, C-PACE interaction, and state conformity advantages.