Understanding MACRS Depreciation for MA Businesses: Solar Tax Benefits Explained
Introduction
When Massachusetts businesses invest in solar energy, they often hear about the financial benefits of MACRS depreciation. The Modified Accelerated Cost Recovery System (MACRS) provides a way for businesses to recover the cost of their solar installations through significant tax savings. For 2025, the MACRS depreciation schedule includes a 40% bonus depreciation, making it especially appealing. However, it’s essential to understand what MACRS is, how it works, and why Spectrum Energy excludes it from ROI calculations. As always, we recommend consulting with a tax professional to confirm all depreciation values and schedules.
What Is MACRS Depreciation?
MACRS, or the Modified Accelerated Cost Recovery System, is a tax benefit that allows businesses to recover the cost of qualifying assets, such as solar energy systems, over a specified period. For solar installations, this period is five years. The purpose of MACRS is to incentivize investments in renewable energy by providing a way to reduce tax liability over time.
Additionally, MACRS often works in conjunction with bonus depreciation. In 2025, businesses can deduct 40% of the system’s depreciable basis upfront, with the remaining 60% depreciated over the standard MACRS schedule. This combination of benefits provides a powerful financial incentive for businesses adopting solar.
MACRS Depreciation Schedule for 2025
In 2025, businesses installing solar systems can take advantage of both 40% bonus depreciation and the standard MACRS schedule. Here’s how it breaks down:
40% Bonus Depreciation: In Year 1, businesses can deduct 40% of the system’s depreciable basis immediately.
Remaining 60% Basis: The remaining 60% is depreciated over the following five years using the MACRS schedule:
Year 1: 12% of the remaining basis
Year 2: 19.2%
Year 3: 11.52%
Year 4: 11.52%
Year 5: 5.76%
Example Calculation
For a $75,000 solar system:
40% Bonus Depreciation: $30,000 in Year 1
Remaining Basis (60%): $45,000, depreciated as follows:
Year 1: $5,400
Year 2: $8,640
Year 3: $5,184
Year 4: $5,184
Year 5: $2,592
While this provides substantial tax savings, the total upfront cost of the system remains unchanged.
Why Spectrum Energy Excludes MACRS from ROI
At Spectrum Energy, we believe that ROI should focus on your solar system’s actual performance—the electricity it generates and the money it saves on energy bills. Including tax benefits like MACRS depreciation inflates ROI calculations and muddies the waters, making it harder to see the system’s true value.
Here’s why:
It’s a Tax Benefit, Not a Performance Metric: Depreciation reduces your tax liability, but it doesn’t impact how much electricity your solar system produces or how much you save on energy costs.
Avoiding Overinflated Numbers: Including MACRS in ROI calculations can artificially boost the numbers, creating a misleading picture of the system’s financial performance.
Every Business Has a Unique Tax Situation: The benefits of MACRS depend on your taxable income and financial structure, so they vary widely. Instead of making assumptions, we provide clear, performance-based ROI calculations.
By focusing on transparency and operational benefits, we ensure you have an accurate understanding of your solar investment.
Benefits of MACRS Depreciation Beyond ROI
While Spectrum Energy excludes MACRS from ROI calculations, this tax benefit still enhances your overall financial return. By reducing your tax liability, MACRS improves cash flow, making it easier to recoup the cost of your solar investment over time. However, it’s important to remember that these tax savings don’t directly lower the upfront or net cost of the system. Instead, they are a financial incentive designed to encourage renewable energy adoption.
We recommend consulting with your tax professional to determine how MACRS depreciation applies to your unique situation and to maximize the tax benefits available to your business.
Why Choose Spectrum Energy?
Spectrum Energy is committed to transparency and honesty in every aspect of your solar investment. By focusing on ROI based on system performance—not inflated by tax benefits—we provide a clear and accurate picture of your system’s value. Our goal is to help you make an informed decision that aligns with your business’s financial goals while delivering clean, renewable energy.
Curious how solar could benefit your business? Contact Spectrum Energy today to learn more about your solar options and the financial incentives available in Massachusetts!
