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Get a Free Quote5-year accelerated depreciation + 20% first-year bonus + Section 48 ITC stacking. Connecticut has the highest electric rates in the continental U.S. — MACRS makes commercial solar payback even faster.
MACRS Schedule
5 Years
vs. 25+ year panel life
2026 Bonus
20%
First-year extra deduction
CT Electric Rate
$0.27+
Eversource / UI avg
ITC Stacking
30-70%
Section 48/48E credit
The Modified Accelerated Cost Recovery System (MACRS) is a federal tax depreciation method that allows businesses to recover the cost of capital assets through annual deductions. Commercial solar energy systems qualify for 5-year MACRS depreciation — meaning the IRS lets you write off the entire cost of a solar system over just 5 tax years, even though solar panels last 25-30+ years.
This is not a tax credit — it is a tax deduction that reduces your taxable income. The faster you can deduct the cost, the sooner you reduce your tax bill and recover your investment. MACRS front-loads these deductions, with the largest percentages in Years 1 and 2.
For Connecticut businesses, MACRS is especially compelling because CT has among the highest commercial electric rates in the entire United States — Eversource averages ~$0.27/kWh and United Illuminating ~$0.28/kWh. When you combine accelerated depreciation tax savings with electricity cost avoidance of $0.27-$0.28 per kilowatt-hour, the payback period on commercial solar drops dramatically — often to 3-5 years for larger systems.
Without MACRS, a business would depreciate solar panels over their useful life (25-39 years using straight-line depreciation), generating small annual deductions. MACRS compresses the entire deduction into 5 years, with most of the value concentrated in Years 1-3. This creates significantly larger deductions when they matter most — during the early years of system ownership when you are recovering your investment.
In addition to the standard 5-year MACRS schedule, commercial solar systems placed in service in 2026 qualify for 20% first-year bonus depreciation. This allows businesses to deduct an extra 20% of the adjusted depreciable basis in Year 1 — on top of the regular MACRS percentage.
2022
100%
Expired
2023
80%
Expired
2024
60%
Expired
2025
40%
Expired
2026
20%
Current
2027
0%
No Bonus
The Tax Cuts and Jobs Act (TCJA) established a phase-down from 100% bonus depreciation in 2022 to 0% by 2027. A system placed in service in 2026 gets 20% bonus. A system placed in service in 2027 gets nothing — only the standard 5-year MACRS schedule. For a $405,000 CT system, this timing difference means approximately $19,275 more in Year 1 tax savings by acting in 2026.
The MACRS 5-year property class uses the 200% declining balance method switching to straight-line in the later years. With the 2026 bonus, Year 1 captures 36% of the depreciable basis — nearly double the standard rate.
| Year | Standard MACRS | With 20% Bonus (2026) | On $344K Basis* |
|---|---|---|---|
| Year 1 | 20.00% | 36.00% | $123,930 |
| Year 2 | 32.00% | 25.60% | $88,128 |
| Year 3 | 19.20% | 15.36% | $52,877 |
| Year 4 | 11.52% | 9.22% | $31,740 |
| Year 5 | 11.52% | 9.22% | $31,740 |
| Year 6 | 5.76% | 4.60% | $15,835 |
| Total | 100% | 100% | $344,250 |
* Example: $405,000 system (150 kW at $2.70/W) with 30% ITC. Depreciable basis = $405,000 - ($121,500 x 50%) = $344,250
Businesses that own their commercial solar system can claim both the Section 48/48E Investment Tax Credit (ITC) and MACRS depreciation. The key interaction: the depreciable basis must be reduced by 50% of the ITC claimed. Here is the step-by-step calculation:
The ITC is a dollar-for-dollar federal tax credit. The base rate is 30% for projects meeting prevailing wage + apprenticeship requirements. Bonus adders can push this to 40%, 50%, or up to 70%.
$405,000 system x 30% = $121,500 ITC (tax credit, not deduction)
Reduce the total system cost by 50% of the ITC claimed. This prevents "double-dipping" — you still depreciate most of the cost, but not the full ITC-covered portion.
$405,000 - ($121,500 x 50%) = $405,000 - $60,750 = $344,250 depreciable basis
Apply the 20% first-year bonus to the adjusted basis, then apply the standard Year 1 MACRS rate (20%) to the remaining balance. The result is a 36% effective Year 1 rate.
Bonus: $344,250 x 20% = $68,850. Regular MACRS: $275,400 x 20% = $55,080. Year 1 total: $123,930
Combine the ITC (dollar-for-dollar credit) with the depreciation deduction (multiplied by your marginal tax rate). For a CT C-corp, the federal rate is 21% + CT 6.99% = 27.99%.
$121,500 ITC + ($123,930 x 27.99%) = $121,500 + $34,688 = $156,188 Year 1 federal+state tax benefit
| ITC Rate | Basis Reduction | Depreciable % of Cost | On $405K System |
|---|---|---|---|
| 30% | 15% | 85% | $344,250 |
| 40% | 20% | 80% | $324,000 |
| 50% | 25% | 75% | $303,750 |
| 60% | 30% | 70% | $283,500 |
| 70% | 35% | 65% | $263,250 |
Formula: Depreciable Basis = System Cost - (ITC Amount x 50%). Higher ITC = lower depreciable basis, but the ITC credit itself more than compensates.
Connecticut has its own rules for depreciation and solar tax treatment. Understanding the state-level nuances is critical for accurate financial modeling.
Unlike Massachusetts, Connecticut generally conforms to federal bonus depreciation for corporation business tax purposes. This means:
Confirm with your CPA, as CT conformity can change with legislative updates.
Solar equipment is exempt from the 6.35% Connecticut sales tax. This is an at-purchase savings — no application required.
On a $405,000 system: $25,713 instant savings
Does NOT reduce MACRS depreciable basis
Connecticut does not have a blanket statewide property tax exemption for solar. Instead, municipalities can offer PILOT (Payment in Lieu of Taxes) agreements for commercial solar installations.
PILOT terms vary by town — typically 0-2% of assessed value, negotiated on a case-by-case basis
Some towns offer 100% exemption. Check with your municipality before committing.
Instead of (or in combination with) MACRS + bonus depreciation, CT businesses can elect Section 179 expensing to deduct up to $1,220,000 (2026 limit) of the solar system cost in Year 1. Section 179 may be advantageous for smaller systems where the full cost falls under the limit. Unlike bonus depreciation, Section 179 requires the business to have sufficient taxable income in the deduction year. Your CPA can model which election produces the better outcome.
Connecticut offers Zero Emission Renewable Energy Credits (ZRECs) and Low-Emission Renewable Energy Credits (LRECs) — long-term contracts where utilities purchase renewable energy certificates from commercial solar systems.
ZREC (Small: 0-100 kW)
15-year contracts via competitive auction. Revenue stacks on top of net metering and MACRS/ITC tax benefits.
ZREC (Medium/Large: 100 kW-2 MW+)
Larger allocations with negotiated pricing. Annual auction rounds — check Eversource/UI schedules.
The Section 48/48E commercial ITC starts at a 30% base rate and can stack up to 70% with bonus adders. Each adder has specific eligibility requirements. The ITC is available for projects that begin construction before July 4, 2026.
Base ITC: 30%
Prevailing wage + apprenticeship (projects > 1 MW)
Domestic Content (FEOC): +10%
US-manufactured steel, iron, and components. Deadline: July 4, 2026
Energy Community: +10%
Brownfield, closed coal mine/plant, or fossil fuel employment area (check ZIP)
Low-Income: +10-20%
Located in low-income community or serving low-income beneficiaries
Maximum possible ITC: 30% + 10% + 10% + 20% = 70%. On a $405,000 system, that is $283,500 in tax credits.
The residential solar tax credit (Section 25D) expired December 31, 2025. Homeowners who buy solar with cash or a loan receive $0 from the federal government. The Section 48/48E commercial ITC is a separate program that remains available for commercial projects (including third-party-owned residential systems under PPA/lease structures) that begin construction before July 4, 2026. The system owner — not the installer — claims the ITC.
MACRS depreciation requires taxable income to be effective — the deduction is only valuable if you have income to offset. Different business structures benefit in different ways.
Maximum benefit. C-corps deduct MACRS directly against corporate income. The 21% federal rate + 6.99% CT rate = up to 27.99% marginal tax savings on depreciable amount.
MACRS deductions pass through to shareholders on Schedule K-1. Each shareholder deducts their pro-rata share against personal income. CT personal rate ranges from 3% to 6.99%.
Similar to S-corps. Depreciation allocations flow through to members per the operating agreement. Tax equity partnerships can optimize allocation.
MACRS deductions flow to Schedule C. Effective if the owner has significant business income. Limited by passive activity rules if solar is a separate activity.
Cannot use MACRS directly (no taxable income). Instead, use PPA/lease structures where the for-profit system owner claims MACRS + ITC and passes savings through lower rates.
Let us walk through a real-world example of a 150 kW commercial solar system on a mid-size business rooftop in Hartford, Connecticut. This shows how MACRS, ITC, and CT-specific benefits stack together.
System Size
150 kW
Cost per Watt
$2.70/W
Gross Cost
$405,000
Entity Type
C-Corp
Section 48 ITC (30%)
$405,000 x 30% = dollar-for-dollar tax credit
$121,500
Depreciable Basis
$405,000 - ($121,500 x 50%) = adjusted basis
$344,250
Year 1 Bonus Depreciation (20%)
$344,250 x 20% = bonus deduction
$68,850
Regular Year 1 MACRS (20%)
($344,250 - $68,850) x 20%
$55,080
Total Year 1 Depreciation Deduction
$68,850 + $55,080
$123,930
Year 1 Depreciation Tax Savings
$123,930 x 27.99% (21% fed + 6.99% CT)
$34,688
Total Year 1 Tax Benefit
$121,500 ITC + $34,688 depreciation savings
$156,188
Sales Tax Savings
$25,713
6.35% exemption at purchase
Property Tax (PILOT)
Varies by town
Negotiate with municipality — some offer 100% exemption
Annual Electricity Savings
~$49,500/yr
180,000 kWh x ~$0.275/kWh avg commercial rate
ZREC Revenue (Est.)
~$9,000/yr
15-year contract via competitive auction (varies by vintage)
Additional MACRS deductions in Years 2-6 plus annual electricity savings ($49,500/yr) and ZREC revenue ($9,000/yr) further reduce effective cost. Typical payback: 3-5 years for CT C-corps.
Common questions from CFOs, business owners, and tax advisors about MACRS solar depreciation in Connecticut.
MACRS (Modified Accelerated Cost Recovery System) allows Connecticut businesses to depreciate commercial solar systems over 5 years for federal tax purposes, even though solar panels last 25+ years. This front-loads tax deductions, creating significant cash flow benefits in the early years of ownership. In 2026, an additional 20% first-year bonus depreciation is available, further accelerating the tax benefit. The depreciable basis is reduced by 50% of any ITC claimed.
In 2026, businesses can claim 20% first-year bonus depreciation on the adjusted depreciable basis of a solar system, on top of regular MACRS depreciation. For example, on a $405,000 system (150 kW at $2.70/W) with 30% ITC ($121,500), the depreciable basis is $344,250. The 20% bonus is $68,850, plus regular first-year MACRS of $55,080 on the remaining balance. This is the last year with any bonus depreciation -- it drops to 0% in 2027.
Yes. Businesses that own their commercial solar system can claim both the Section 48/48E ITC (30% base, up to 70% with adders) AND 5-year MACRS depreciation. The only interaction is that the depreciable basis must be reduced by 50% of the ITC claimed. For a 30% ITC, the depreciable basis becomes 85% of the system cost. For a 50% ITC, the depreciable basis becomes 75%. Both benefits require system ownership -- PPA and lease structures transfer these benefits to the third-party owner.
Connecticut generally conforms to federal MACRS depreciation, including bonus depreciation, for corporation business tax purposes. Unlike Massachusetts, CT does not require an add-back of federal bonus depreciation on the state return. This means CT businesses receive the full benefit of bonus depreciation on both their federal AND state returns in Year 1. Consult your CPA to confirm current conformity, as state tax law can change.
When combining MACRS with the Section 48 ITC, the depreciable basis is reduced by 50% of the ITC claimed. The formula is: Depreciable Basis = Total System Cost - (ITC Amount x 50%). For example, a $405,000 system with a 30% ITC ($121,500) has a depreciable basis of $405,000 - $60,750 = $344,250. With a 50% ITC ($202,500), the depreciable basis would be $405,000 - $101,250 = $303,750.
C-corporations with high taxable income benefit most, since they can directly deduct MACRS against corporate income at the 21% federal rate plus 6.99% CT corporation business tax rate. S-corporations and multi-member LLCs also benefit, as depreciation deductions pass through to owners/shareholders via K-1s. Nonprofits and public entities cannot use MACRS directly but benefit indirectly through PPA/lease structures where the for-profit system owner claims MACRS and passes savings through lower rates.
Yes. 2026 offers 20% first-year bonus depreciation for commercial solar -- down from 40% in 2025, 60% in 2024, 80% in 2023, and 100% in 2022. In 2027, bonus depreciation drops to 0%. This means 2026 is the final year to capture any first-year bonus depreciation above the standard 20% MACRS Year 1 rate. Projects placed in service in 2027 or later will follow the standard 5-year MACRS schedule without any bonus.
Connecticut offers several additional tax benefits that stack with MACRS: (1) Sales tax exemption -- solar equipment is exempt from the 6.35% CT sales tax, saving over $25,000 on a $405,000 system. (2) Property tax -- many CT municipalities offer negotiated PILOT (Payment in Lieu of Taxes) agreements for commercial solar, with terms varying by town. (3) ZREC/LREC programs provide long-term revenue contracts. These exemptions apply automatically (sales tax) or by application (PILOT) and do not reduce the MACRS depreciable basis.
Full commercial solar guide for Connecticut: ZREC/LREC programs, ITC stacking, financing, and ROI for CT businesses.
National MACRS guide: 5-year schedule, bonus depreciation phase-down, and depreciable basis calculations.
Up to $1,220,000 in Year 1 deductions. How Section 179 compares to MACRS for commercial solar installations.
Connecticut residential and commercial solar pricing, utility rates, and incentive stacking for 2026.
Get a personalized MACRS + ITC tax savings analysis for your Connecticut business. Our team will model the exact Year 1 benefit based on your system size, entity type, and tax situation.
Projects must begin construction before July 4, 2026 to qualify for Section 48 ITC. 2026 is the last year for bonus depreciation (drops to 0% in 2027).