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Accelerated Depreciation
With the Modified Accelerated Cost-Recovery System (MACRS) the Federal government is allowing for accelerated depreciation for several renewable energy systems. Solar, geothermal, and wind systems that were installed after 1986 are eligible for a 5-year depreciation schedule. Also, Federal stimulus legislation in 2008 and 2009 allows for a 50% bonus depreciation (one-time) for systems installed (and purchased) during those years.
Accelerated depreciation simply means the shortening of the lifespan of a piece of capital (for tax purposes). Your company may receive cash flow for a solar energy system with a lifespan of 25 years, but the value of that system will be taken out of a gross income for a five-year period. In other words, companies are granted a lowered taxable dividend during those five years. This also allows companies to reduce their tax liability.
