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Capital Based

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Capital based incentives apply to the capital cost of the components. This could either be a tax deduction or a credit or both.

In HOMER Grid, you can apply a capital based incentive to the following components:

Solar

Storage

Below is an explanation of the various inputs in capital based incentive

 

Variable

Description

Percent deduction (%)

Tax deduction as a percent of the capital cost

Maximum deduction

Maximum deduction limit

Percent credit (%)

Tax credit as a percent of the capital cost

Credit per kW (per kWh for storage)

Additional credit per kW/kWh of installed capacity

Maximum credit

Maximum credit allowed

Eligible percent (%)

Portion of capital cost eligible for incentive

Marginal tax percent (%)

The percent of tax applicable

Credit is taxable

Select this option if the credit is reduced by the marginal tax rate

Reduces tax basis

Select this option if deduction and credit reduces the tax basis (cost basis)

Applies to

The components that this bonus depreciation applies to

Below are two examples of capital based incentives:

Example 1

Let us consider a PV system of 100 kW which has a total capital cost of 100,000$. If the capital based incentive applied to this PV system is:

hgrid_capital_based_example1

 

This would mean that the tax credit applied to the system is = 50% of capital cost = 0.50 * 100,000$ = 50,000$

Additional credit per kW of installed capacity = 1 $ * 100 kW (installed capacity) = 100 $

Total credit = 50,000$ + 100$ = 50,100$

Since the "Credit is taxable"  is selected, the marginal tax rate is applied to this credit = (1 - 0.35) * 50,100 $ = 32,565 $

Total Capital based incentive = 32,565 $

Example 2:

Let us consider a PV system of 100 kW which has a total capital cost of 100,000$. If the capital based incentive applied to this PV system is:

hgrid_capital_based_example2

This would mean that the tax credit applied to the system is = 50% of capital cost = 0.50 * 100,000$ = 50,000$

Additional credit per kW of installed capacity = 1 $ * 100 kW (installed capacity) = 100 $

Total credit = 50,000$ + 100$ = 50,100$

Since the Tax deduction is 50 % of capital cost = 0.50 * marginal tax rate * capital cost = 0.50 * 0.35 * 100,000$ = 17,500$

Total deduction and credit = 17,500 + 50,100 $ = 67,600 $

 

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