How can incentives reduce the cost of going solar?
One of the most powerful tools for improving solar’s return on investment is leveraging available financial incentives. Thanks to federal legislation and state-level programs, many commercial solar projects today benefit from 30–60% reductions in gross cost through tax credits, depreciation, and renewable energy credits.
But incentives aren’t one-size-fits-all. They vary based on project ownership, location, system design, and even who will use the energy. This section will walk you through the most important incentives and how Melink Solar helps clients take full advantage of them – whether you’re a for-profit business, a public institution, or a nonprofit organization.
Key Commercial Solar Incentives
| Incentive Type | Description | Who Can Benefit |
| Investment Tax Credit (ITC) | 30% credit on eligible project costs | Businesses, nonprofits (via Direct Pay) |
| Bonus ITC Adders | Additional 10–20% if project meets criteria (e.g., low-income, domestic content, apprenticeship) | Select projects with qualifying design or location |
| MACRS Depreciation | Accelerated tax depreciation to recover cost quickly | For-profit businesses |
| Direct Pay (Refundable Credit) | Nonprofits and tax-exempt entities can receive ITC as a cash refund | Schools, governments, religious institutions, nonprofits |
| SRECs & State/Local Incentives | Solar Renewable Energy Credits and grants in certain states | Depends on state, utility, and policy landscape |
Incentive: Federal Investment Tax Credit (ITC) #
The Investment Tax Credit (ITC) is the cornerstone of solar incentives. It currently provides a 30% credit on eligible system costs and applies to rooftop, ground mount, and solar canopy installations. The ITC is scheduled to remain at 30% through 2032, after which it begins to phase down unless extended by Congress.
For qualifying projects, additional “bonus” credits may be available, including:
- 10% bonus for meeting domestic content requirements
- 10% bonus for building in an energy community
- 10–20% bonus for serving low-income customers or projects in low-income areas
- 5% bonus for meeting prevailing wage and apprenticeship labor requirements
These stackable adders can boost your total tax credit to 50% or more in some cases.
Incentive: MACRS Bonus Depreciation #
In addition to the ITC, for-profit businesses can take advantage of accelerated depreciation under the Modified Accelerated Cost Recovery System (MACRS). This allows solar system costs to be depreciated over five years.
Bonus depreciation rules have changed under current tax law:
- 40% bonus depreciation applies for projects placed in service in 2025
- The bonus percentage steps down each year unless extended
MACRS, combined with the ITC, can significantly reduce the net cost of solar in the first few years of operation – great for organizations focused on fast ROI.
Incentive: Direct Pay for Nonprofits and Public Entities #
Under the Inflation Reduction Act, nonprofit and tax-exempt entities can now access the full 30% ITC as a refundable tax credit, even though they don’t owe federal taxes.
This “Direct Pay” option enables organizations like:
- Schools and universities
- Religious institutions
- Local governments and municipalities
- 501(c)(3) nonprofits
…to receive the tax credit as a cash refund, leveling the playing field with for-profit solar owners. This change has opened the door for thousands of mission-driven organizations to pursue clean energy with real financial returns.
Incentive: SRECs, Grants, and State-Level Incentives #
Many states offer their own solar incentive programs – some generous, others limited. Common programs include:
- SRECs (Solar Renewable Energy Credits) that pay you for the clean energy your system produces
- Grants or performance-based incentives
- Sales tax or property tax exemptions
- Net metering policies that enhance ROI (covered in Section 2.2)
To find what’s available in your state or utility territory, we recommend browsing DSIRE, the Database of State Incentives for Renewables & Efficiency.
Want to know how incentives affect your total system cost?
Jump back to Section 4.1: Cost of Solar for a breakdown of how incentives can offset capital investment and shape ROI.
Are you a nonprofit interested in solar?
Visit Section 4.3: Financing to learn how Direct Pay, CollectiveSun, and other creative funding options make solar accessible for mission-driven organizations.