Tax Credits and Incentives for Commercial Solar Water Heating

In Oregon, utility incentives, combined with the federal tax credits and accelerated depreciation, may be used to bring down the net cost to install a solar hot water system.

There are different incentives available for businesses that affect the average cost and payback period of installing solar water heating. The main incentives are the Federal tax credit, federal accelerated depreciation, and utility rebates. Unlike residential solar hot water, there are no Oregon state tax credits for commercial solar.

Federal Tax Credit and Federal Accelerated Depreciation

Both Oregonian and Washington businesses are eligible to receive Federal tax credits, which is 30% of total system costs (minus any utility incentive). These tax credits can be taken in the year the system is operational or can be carried forward if the credits exceed tax liability. Self-installed systems qualify, but need to be verified by a tax credit-certified technician. NOTE: The Federal tax credit for commercial solar hot water is scheduled to reduce from 30% of installed cost to 10% of installed cost on December 31st, 2016. 

Federal Accelerated Depreciation: Businesses may depreciate the cost of a solar hot water system following the five-year Modified Accelerated Cost Recovery System. Claiming accelerated depreciation can provide a tax deduction benefit that offsets up to 25 percent of the cost of the installation. The five-year depreciation schedule can be found in the most recent version of IRS Publication 946.

Oregon Utility Cash Incentives

Some of the utilities in Oregon will offer you a financial incentive if you install a solar water heater system. Currently, Portland General Electric and Pacific Power do not offer an incentive for solar water heating. If you have a different utility, contact them to see if they offer an incentive. The Database of State Incentives for Renewables and Efficiency (DSIRE) has a comprehensive list of utility incentives across Oregon. (When on the DSIRE site, we recommend using the filter tool and selecting “Solar Technologies” Technology category and “Rebate Program” in the Program Type category.)