Calculator Inputs
Example Data Table
| Scenario | Cost | ITC | Bonus | Method | Tax Rate | Year 0 Depreciation | Year 1 Scheduled Depreciation |
|---|---|---|---|---|---|---|---|
| Sample | 250,000 | 30% | 40% | MACRS 5-year | 25% | Immediate + Bonus | 20% of remaining basis |
Formula Used
- Adjusted basis = Cost − (0.5 × ITC% × Cost), when basis reduction is enabled.
- Immediate expensing is capped to the adjusted basis.
- Bonus depreciation = (Adjusted basis − Immediate expensing) × Bonus%.
- Scheduled basis = Adjusted basis − Immediate expensing − Bonus depreciation.
- MACRS schedule: Annual depreciation = Scheduled basis × MACRS rate for each year.
- Declining balance: Depreciation = Book value × (Factor ÷ Life), switching to straight-line when higher.
- Tax savings = Depreciation × Tax rate.
- Present value = Tax savings ÷ (1 + Discount rate)year.
How to Use This Calculator
- Enter the installed system cost and the placed-in-service year.
- Set the ITC percent and choose whether to reduce depreciable basis.
- Add any immediate expensing amount and the bonus depreciation percent.
- Select a depreciation method and class life if using MACRS.
- Provide tax rate and discount rate to estimate cash impact and present value.
- Click Calculate to show the schedule above the form.
- Use the CSV and PDF buttons to export the latest results.
Professional Notes on Solar Accelerated Depreciation
1) Why accelerated depreciation matters
Construction budgets for solar systems are capital intensive, so the timing of deductions can materially change cash flow. Accelerated schedules front-load depreciation, creating earlier tax shields. Earlier tax shields are typically worth more than later ones because they reduce taxes sooner and can improve project metrics like payback and discounted value.
2) Basis, ITC, and basis reduction
The depreciable basis generally starts with the installed cost. Many solar models apply a basis reduction tied to the investment credit, commonly reducing basis by 50% of the credit percentage. For example, a 30% credit implies a 15% basis reduction, so a 250,000 cost becomes 212,500 depreciable basis.
3) Immediate expensing and bonus depreciation
This calculator separates three layers: immediate expensing, bonus depreciation, and the remaining scheduled portion. Bonus is calculated as a percentage of basis after expensing. If the bonus rate is 40% and scheduled basis is 212,500, bonus equals 85,000, leaving 127,500 to depreciate under the selected method.
4) Comparing common schedules
Under MACRS 5-year half-year convention, the scheduled portion uses standard annual rates (e.g., 20% in year 1, 32% in year 2). Declining-balance methods apply a fixed rate to book value and typically switch to straight-line when it produces a larger deduction. Straight-line and sum-of-years’ digits may better match internal reporting needs.
5) Turning deductions into financial impact
The tax savings each period equal depreciation multiplied by the assumed tax rate. Present value discounts each year’s savings by (1 + discount rate)year. A higher discount rate penalizes distant deductions and increases the advantage of accelerated methods. Use exports to document assumptions for stakeholders and lenders.
FAQs
1) What does “accelerated depreciation” mean here?
It means larger depreciation deductions in earlier years compared with straight-line. The calculator supports MACRS, declining balance (with a switch to straight-line), and sum-of-years’ digits to model faster early deductions.
2) Is the investment credit treated as depreciation?
No. The credit is shown as a reference value because it reduces tax liability differently than deductions. If enabled, the calculator reduces depreciable basis by 50% of the credit percentage to reflect a common planning approach.
3) Why is there a “period 0” line in the schedule?
Period 0 combines immediate expensing and bonus depreciation, which are often taken at placement in service. Scheduled depreciation then begins in later periods, producing a clearer split between upfront and annual deductions.
4) Why does MACRS ignore salvage value in this tool?
Standard MACRS percentage tables typically depreciate the basis without modeling salvage value. For methods that do consider salvage, choose straight-line, sum-of-years’ digits, or declining balance in the method selector.
5) What is the “present value of tax savings”?
It discounts each year’s estimated tax savings back to the start year using your discount rate. This helps compare methods on a time-value-of-money basis, especially when schedules stretch across many years.
6) Which method should I use for solar projects?
Use the method that matches your modeling and reporting needs. MACRS is common for planning, while straight-line may align with some internal books. Declining balance can approximate more aggressive early deductions.
7) Can I share the schedule with my team?
Yes. After you calculate, export CSV for spreadsheets and PDF for quick review. Include the inputs, tax rate, discount rate, and basis reduction setting so reviewers can reproduce the same depreciation schedule.