Incentives
Bonus Depreciation
Definition
A tax incentive allowing businesses to immediately deduct a large percentage of the cost of qualifying business assets (including energy equipment) in the year they are placed in service, rather than depreciating over multiple years. Under current law (post-2022 phase-down), rates are 60% in 2024, 40% in 2025, and 20% in 2026.
Why It Matters for Your Business
Bonus depreciation accelerates the tax benefit of capital investments, improving first-year cash flow and project ROI. Combined with the ITC, bonus depreciation can dramatically reduce the net after-tax cost of energy upgrades in Year 1.
Frequently Asked Questions
Is 100% bonus depreciation still available?
100% bonus depreciation expired at the end of 2022. It phases down as follows: 80% (2023), 60% (2024), 40% (2025), 20% (2026), 0% (2027+) under current law, unless Congress acts.
What energy assets qualify for bonus depreciation?
Most commercial energy equipment with a MACRS class life of 20 years or less — solar PV, HVAC, LED lighting, battery storage, VFDs, EMS systems. Excludes real property (structural components).