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Get a Free Quote5-year accelerated depreciation + 100% first-year bonus + Section 48 ITC + NJ ADI stacking. OBBBA permanently restored 100% bonus depreciation — it no longer phases down to 0%.
MACRS Schedule
5 Years
vs. 25+ year panel life
Bonus Depreciation
100%
First-year deduction (permanent)
ADI Rate
$85.00
/MWh for 15 years
ITC Stacking
30-70%
Section 48/48E credit
MACRS (the Modified Accelerated Cost Recovery System) is the federal depreciation method that lets a business recover the cost of a capital asset as a tax deduction — not a credit. Commercial solar is 5-year property, so the IRS lets you write off the full system cost over five tax years even though the panels run 25-30+. The mechanics are identical in every state; what changes for a New Jersey owner is how valuable each dollar of deduction is once the state corporate tax is layered on. For the federal schedule, basis math, and entity-by-entity rules, see our national MACRS depreciation hub; this page focuses on what is specific to New Jersey.
Here is the New Jersey angle that most national guides miss: a deduction is only worth your marginal tax rate, and New Jersey runs one of the highest corporate tax regimes in the country. The Corporation Business Tax (CBT) tops out at 11.5% (a 9% base plus a 2.5% surtax on income over $10M) and sits at 9% for the broad band of mid-size C-corps. Stacked on the 21% federal rate, that pushes a NJ C-corp's combined marginal rate toward 30-32.5% — so every $100,000 of MACRS deduction shields up to ~$32,500 of tax. The same deduction is worth materially more in New Jersey than in a low-corporate-tax state.
MACRS does not stand alone in New Jersey. It is one layer in an unusually deep stack: the federal Section 48/48E ITC, the state's SuSI / Successor Solar Incentive (the SREC-II successor) paying per-MWh for 15 years, a full sales-tax exemption on solar equipment, a property-tax exemptionon the added value, and full-retail net metering up to 2 MW through PSE&G, JCP&L, and Atlantic City Electric. The depreciation engine is federal; the surrounding incentive stack is what makes the NJ math work.
Straight-line over a 25-39 year useful life would dribble the deduction out in tiny annual slices. MACRS plus 100% bonus collapses it into Year 1. In New Jersey that compression is worth more than almost anywhere because the deduction is applied against a ~30% combined federal + CBT rate — so a NJ owner converts depreciation into cash tax savings faster, and at a higher per-dollar value, than a business in a low-corporate-tax state.
On top of the 5-year schedule, commercial solar qualifies for 100% first-year bonus depreciation, permanently restored by OBBBA (IRC §168(k)) for property placed in service after January 19, 2025. The entire adjusted depreciable basis is deducted in Year 1. This is a federalrule — it applies identically in New Jersey, but (as the next section explains) New Jersey's separate treatment of bonus depreciation at the state CBT level is the one place where the NJ owner's timing can differ from the federal return.
2022
100%
Expired
2023
80%
Expired
2024
60%
Expired
Jan 19, 2025
40%
Expired
2025+ (OBBBA)
100%
Current
2026 & after
100%
Current
The Tax Cuts and Jobs Act (TCJA) had established a phasedown from 100% bonus depreciation in 2022 toward 0% by 2027. OBBBA reversed that: it permanently restored 100% first-year bonus depreciation (IRC §168(k), IRS Notice 2026-11) for property placed in service after January 19, 2025. A system placed in service in 2026, 2027, or later all qualify for the full 100% bonus — the timing benefit no longer disappears.
The MACRS 5-year property class uses 200% declining balance switching to straight-line, but with the 100% bonus that schedule is moot — Year 1 captures the entire depreciable basis. The table below runs the worked example on a New Jersey 200 kW system: at a mid-size NJ installed price of roughly $1.50-$1.85/W (per NuWatt's commercial pricing), a 200 kW project lands near $560,000 before the sales-tax exemption, giving a $476,000 depreciable basis after the standard ITC basis reduction.
| Year | Standard MACRS | With 100% Bonus | On $476K Basis* |
|---|---|---|---|
| Year 1 | 20.00% | 100.00% | $476,000 |
| Year 2 | 32.00% | 0.00% | $0 |
| Year 3 | 19.20% | 0.00% | $0 |
| Year 4 | 11.52% | 0.00% | $0 |
| Year 5 | 11.52% | 0.00% | $0 |
| Year 6 | 5.76% | 0.00% | $0 |
| Total | 100% | 100% | $476,000 |
* Example: $560,000 system with 30% ITC. Depreciable basis = $560,000 - ($168,000 x 50%) = $476,000
An owner can claim both the Section 48/48E ITC and MACRS — the one interaction is that the depreciable basis drops by 50% of the ITC claimed. The basis math itself is federal and the same anywhere; what follows walks a New Jersey project through it. Note one NJ-favorable wrinkle baked into these numbers: because NJ fully exempts solar equipment from sales tax, the system cost that flows into both the ITC and the depreciable basis is the clean equipment price — there is no sales tax inflating the project (unlike PA, which taxes solar at 6%).
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%.
$560,000 system x 30% = $168,000 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.
$560,000 - ($168,000 x 50%) = $560,000 - $84,000 = $476,000 depreciable basis
Apply the 100% first-year bonus to the adjusted basis. The entire depreciable basis is expensed in Year 1, leaving nothing for the remaining MACRS schedule.
Bonus: $476,000 x 100% = $476,000. Remaining MACRS basis: $0. Year 1 total: $476,000
Combine the ITC (dollar-for-dollar credit) with the depreciation deduction (multiplied by your marginal tax rate). For a C-corp, the federal rate is 21% plus NJ CBT at 9%.
$168,000 ITC + ($476,000 x 30%) = $168,000 + $142,800 = $310,800 Year 1 tax benefit
| ITC Rate | Basis Reduction | Depreciable % of Cost | On $560K System |
|---|---|---|---|
| 30% | 15% | 85% | $476,000 |
| 40% | 20% | 80% | $448,000 |
| 50% | 25% | 75% | $420,000 |
| 60% | 30% | 70% | $392,000 |
| 70% | 35% | 65% | $364,000 |
Formula: Depreciable Basis = System Cost - (ITC Amount x 50%). Higher ITC = lower depreciable basis, but the ITC credit itself more than compensates.
New Jersey has among the most favorable state-level tax environments for commercial solar in the country. Understanding NJ-specific rules is critical for accurate financial modeling.
New Jersey generally follows federal MACRS depreciation for CBT purposes. Key considerations:
Total depreciation over 5 years is the same — only the Year 1 timing may differ for NJ.
Solar energy equipment is 100% exempt from NJ sales tax (normally 6.625%). This applies to all solar components, inverters, racking, and batteries.
On a $560,000 system: $37,100 instant savings
Does NOT reduce MACRS depreciable basis
New Jersey exempts solar energy systems from property tax increases. Solar installations do not increase assessed property value.
NJ avg property tax rate: ~2.23% (highest in the US)
Without this exemption, a $560K system could add ~$12,500/yr in property taxes
This is the layer that distinguishes New Jersey from neighboring states. The SuSI (Successor Solar Incentive) program — the successor to NJ's SREC-II framework — pays a fixed per-MWh incentive for 15 years, with larger commercial projects priced through the ADI (Administratively Determined Incentive) track. That revenue is taxable income but does not reduce the MACRS depreciable basis, so it stacks on top of the federal tax benefits rather than competing with them.
Incentive structure
Fixed per-MWh payments for a 15-year term — long-term revenue certainty, not a one-time rebate.
Commercial ADI rate
$85.00/MWh used in the case study below; SuSI ceilings run up to ~$90/MWh depending on segment. Confirm your project's exact rate with NuWatt.
A 200 kW system producing ~240 MWh/year earns approximately $20,640/year at $85.00/MWh — roughly $309,600 over the 15-year term, entirely separate from the MACRS + ITC tax benefits. Full SuSI / ADI guide
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. Projects that begin construction on or before July 4, 2026 lock in the full timing pathway; projects that begin after that date can still qualify but generally must be placed in service by December 31, 2027.
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 $560,000 system, that is $392,000 in tax credits.
The residential credit (Section 25D) expired December 31, 2025. The Section 48/48E commercial ITC is a separate, still-active program. For New Jersey this distinction matters more than usual: NJ's mature third-party-ownership market means even residential rooftops can sit under a PPA or lease where a for-profit owner — not the homeowner — claims 48E + MACRS and prices the savings back into the per-kWh rate. Begin construction on or before July 4, 2026 to lock the full timing pathway; later starts still qualify if placed in service by December 31, 2027.
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 — and more so in New Jersey than almost anywhere else. C-corps deduct MACRS directly against corporate income, and NJ's 9% CBT (11.5% with the surtax above $10M) stacks on the 21% federal rate for a combined ~30-32.5% rate. That high marginal rate is precisely what makes each dollar of NJ depreciation so valuable.
MACRS passes through to shareholders on Schedule K-1; each deducts their pro-rata share against personal income. NJ's Gross Income Tax is graduated up to 10.75% at the top bracket, so high-income NJ shareholders capture a deep state-level benefit. Requires sufficient tax basis.
Allocations flow to members per the operating agreement, and NJ's Pass-Through Business Alternative Income Tax (BAIT) election can move the deduction to the entity level — useful for SALT-cap planning around NJ-source income. Tax-equity partnerships optimize the allocation.
MACRS flows to Schedule C and offsets NJ Gross Income Tax through the personal return. Effective where the owner has significant business income; limited by passive-activity rules if the solar is a separate activity.
Cannot use MACRS directly (no taxable income) — common for NJ municipalities, school districts, and houses of worship. The fix is a PPA or lease: a for-profit owner claims MACRS + ITC and passes the value back as a lower per-kWh rate. NJ has an unusually deep PPA/lease market built around the SuSI program.
Let us walk through a real-world example of a 200 kW commercial solar system on a warehouse rooftop in Edison, New Jersey. This shows how MACRS, ITC, and NJ-specific benefits stack together to create one of the best commercial solar ROIs in the country.
System Size
200 kW
Gross Cost
$560,000
Location
Edison, NJ
Entity Type
C-Corp (9% CBT)
Section 48 ITC (30%)
$560,000 x 30% = dollar-for-dollar tax credit
$168,000
Depreciable Basis
$560,000 - ($168,000 x 50%) = adjusted basis
$476,000
Year 1 Bonus Depreciation (100%)
$476,000 x 100% = bonus deduction
$476,000
Regular Year 1 MACRS
($476,000 - $476,000) x 20% = $0 (basis fully expensed)
$0
Total Year 1 Depreciation Deduction
$476,000 + $0
$476,000
Year 1 Depreciation Tax Savings
$476,000 x 30% (21% fed + 9% NJ CBT)
$142,800
Total Year 1 Tax Benefit
$168,000 ITC + $142,800 depreciation savings
$310,800
Sales Tax Savings
$37,100
6.625% exemption at purchase
Property Tax Avoided
~$12,488/yr
NJ avg 2.23% property tax rate (highest in US)
Annual Electricity Savings
~$62,400/yr
240,000 kWh x ~$0.26/kWh avg NJ commercial rate
ADI/SREC-II Revenue
~$20,640/yr
240 MWh x $85.00/MWh for 15 years ($309,600 total)
Annual electricity savings ($62,400/yr) and ADI revenue ($20,640/yr for 15 years) further reduce effective cost. With 100% bonus depreciation, the full basis is expensed in Year 1, so there are no residual MACRS deductions in later years. Typical payback: 3-5 years for NJ C-corps.
Section 179 can expense up to $1,220,000 in Year 1 (2026 limit). For New Jersey it is worth a look mainly as a state-level timing tool — because NJ has historically decoupled from federal bonus depreciation, the §179 election (which NJ treats differently than §168(k) bonus) can change when the deduction lands on the CBT return, even though the federal benefit is the same.
For most NJ commercial projects, 100% bonus MACRS already expenses the full basis in Year 1 with no income cap, so Section 179's dollar limit and income test rarely add anything for solar. The one place to check it in New Jersey is the CBT return: NJ has historically decoupled from federal bonus depreciation, so where a NJ add-back applies, a CPA may model a Section 179 or straight-line layer to manage the state-level timing. Federal value is unchanged either way — model both. Full Section 179 guide
Common questions from CFOs, business owners, and tax advisors about MACRS solar depreciation in New Jersey.
MACRS is a federal depreciation method, so the 5-year schedule and the permanent 100% first-year bonus (IRC §168(k), OBBBA, for property placed in service after January 19, 2025) work the same way for a New Jersey business as anywhere else. What is specific to NJ is the value of the deduction: applied against New Jersey's high Corporation Business Tax (9%, up to 11.5% with the surtax) layered on the 21% federal rate, each dollar of MACRS deduction shields close to 30 cents of combined tax — more than in most states. The depreciable basis is reduced by 50% of any ITC claimed.
100% first-year bonus (IRC §168(k), made permanent by OBBBA) lets you deduct the entire adjusted basis in Year 1. On a representative NJ 200 kW system around $560,000 with a 30% ITC ($168,000), the depreciable basis is $476,000 and the full amount is deducted in Year 1. Because NJ exempts solar from sales tax, that $560,000 is the clean equipment price with nothing added. One NJ-specific caveat: New Jersey has historically decoupled from federal bonus at the CBT level, so confirm current-year state conformity with your advisor — the federal Year 1 deduction is unaffected.
Yes — and in New Jersey you stack three layers, not two. An owner can claim the Section 48/48E ITC (30% base, up to 70% with adders) AND 5-year MACRS, with the depreciable basis reduced by 50% of the ITC. On top of that, NJ's SuSI / Successor Solar Incentive pays per-MWh for 15 years; that incentive revenue is taxable but does NOT reduce the depreciable basis, so it stacks cleanly on the tax benefits. All of this requires system ownership — PPA and lease structures transfer the tax benefits to the third-party owner.
Yes. New Jersey generally conforms to federal MACRS depreciation for the Corporation Business Tax (CBT). NJ follows the federal 5-year MACRS schedule, and NJ businesses can claim MACRS deductions on both their federal and NJ state returns. However, NJ has historically decoupled from bonus depreciation -- businesses should confirm current-year conformity with their tax advisor. The standard 5-year MACRS schedule applies regardless.
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 $560,000 system with a 30% ITC ($168,000) has a depreciable basis of $560,000 - $84,000 = $476,000. With a 50% ITC ($280,000), the depreciable basis would be $560,000 - $140,000 = $420,000.
The ADI (Administratively Determined Incentive, formerly SREC-II) program pays $85.00/MWh in Energy Year 2025-26. ADI revenue is treated as taxable income but does NOT reduce the MACRS depreciable basis. A 200 kW system producing ~240 MWh/year generates approximately $20,640/year in ADI payments on top of MACRS + ITC benefits. This stacking is what makes NJ one of the best commercial solar markets in the country.
C-corporations with high taxable income benefit most, since they can directly deduct MACRS against corporate income at the 21% federal rate plus 6.5-11.5% NJ Corporate Business Tax rate (depending on income). 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.
No. The earlier TCJA phasedown (100% in 2022 stepping toward 0% by 2027) was reversed by OBBBA, which permanently restored the 100% first-year bonus under IRC §168(k) for property acquired and placed in service after January 19, 2025 (IRS Notice 2026-11). Projects placed in service in 2027 and beyond still get the full 100% federal bonus. Note this is the federal rule; New Jersey has historically decoupled from federal bonus at the CBT level, which can affect state timing only — confirm current-year conformity with a NJ tax advisor.
Full commercial solar guide: ITC stacking, ADI program, financing, and ROI for NJ businesses.
NJ Administratively Determined Incentive: $85.00/MWh.
National MACRS guide: 5-year schedule, bonus depreciation, basis calculation, and entity comparisons.
Alternative to MACRS: up to $1,220,000 first-year expensing for commercial solar. Income limitations apply.
Get a personalized MACRS + ITC + ADI tax savings analysis for your New Jersey business. Our team will model the exact Year 1 benefit based on your system size, entity type, and tax situation.
Begin construction on or before July 4, 2026 to lock in the full Section 48E timing pathway; later starts still qualify but generally must be placed in service by Dec 31, 2027. 100% bonus depreciation is permanent under OBBBA.