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Bonus Depreciation

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Bonus depreciation, is in addition to the normal depreciation that allows businesses to reduce the cost of purchases.According to the Internal Revenue Service (IRS), "bonus depreciation allows taxpayers to deduct a specified percentage (30, 50, or 100 percent) of depreciation in the year the qualifying property is placed in service". There are specific eligibility criteria that the purchased assets have to meet to be eligible for the bonus depreciation.

In HOMER Grid, you can apply a bonus depreciation to the following components:

Solar

Storage

Below is an explanation of the various inputs in Bonus Depreciation

 

Variable

Description

Percent Credit

The percentage of bonus depreciation applicable in the first year

Marginal tax percent

The percentage of tax rate on the purchased asset

Eligible percent

Percentage of the capital cost eligible for the incentive

Applies to

The components that this bonus depreciation applies to

Example

Let us consider a PV system of 100 kW which has a total capital cost of 100,000$. If the bonus depreciation applied to this PV system is as shown below:

hgrid_bonus_depreciation

This Bonus depreciation = 0.50 * 0.35 * 1 * 100,000$ = 17,500 $

Source: https://www.irs.gov/businesses/cost-segregation-audit-techniques-guide-chapter-6-8-bonus-depreciation-considerations#1

 

 

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