The Best Commercial Solar Incentives in Chicago
Illinois is actively moving towards an ecological future, and commercial solar panels are a powerful tool for entrepreneurs looking to make their contribution. It’s no wonder it ranks in the top fifteen states for solar energy usage.
➤ According to the World Economic Forum, Chicago has an ambitious goal: to transition completely to renewable energy sources by 2026.
Considering these factors, it’s evident that Chicago provides a favorable environment for the development of commercial solar in Chicago. But let’s be honest: the cost of initial investments can be somewhat daunting and discouraging.
This is where generous commercial solar power incentives in Chicago come to the rescue! From federal tax credits to net metering programs and business solar rebates, there are plenty of options to help you save money and increase the profitability of your investments. Read on to learn more about commercial solar in Chicago.
Federal Tax Incentives for Commercial Solar in Chicago: Credits for Businesses
In the U.S., two forms of tax credits incentivize businesses to use solar energy. These credits significantly reduce the cost of solar panel installation and make solar energy more affordable. The main goal of such commercial solar incentives by state is to promote the development of American solar energy.
The Investment Tax Credit (ITC)
The ITC is a fiscal credit that reduces the federal income tax obligation by a certain percentage of the cost of the installed solar system during the reporting tax year.
The credit applies to various solar systems: residential (private) or commercial (including medium and small businesses). However, to qualify for it, the solar system must be installed in the United States no earlier than the end of 2006.
The base is considered a 30% credit, which means that for every $1000 spent on solar panels in Chicago, you will receive a tax credit of $300. Furthermore, the ITC is valid for 5 years. This means that you can deduct 30% of the cost of the solar system from your taxes for 5 years.
However, the credit is anticipated to decrease to 26% by 2033 and then to 22% by 2034.
It is important to note that the ITC is non-refundable. Therefore, you can only use it to reduce the amount of taxes you are obligated to pay. If the credit amount exceeds your liability, you won’t receive a refund for the difference.
However, if you cannot use the entire ITC in the current year, you can carry it forward to subsequent years until the credit amount is exhausted.
To claim the ITC, you need to fill out Form 3468. The instructions for completing the form can be found here.
The Production Tax Credit (PTC)
PTC is another incentive to support the development of solar energy. However, unlike the ITC, it is available exclusively for commercial and utility-scale solar projects, meaning those that generate electricity for sale.
PTC involves a reduction in the obligation to pay federal income tax for each kilowatt-hour (kWh) of electricity generated using solar technologies during the first 10 years of operation of solar panel in Chicago. The incentive is reviewed annually according to the inflation rate.
PTC mainly amounts to 2.75 cents per kWh of electricity generated by a solar panel. So, if your PV system generates 10,000 kWh of electricity per year, you are entitled to a credit of $2750.
PTC can be claimed for 10 years, meaning you can receive a credit for each kWh of electricity you generate over 10 years.
Like ITC, PTC is not refundable.
To claim PTC, you need to fill out Form 8962. Instructions for completing the form are available here.
How to Choose Between ITC and PTC?
Both ITC and PTC are powerful government incentives for commercial solar power that accelerate innovation and technological progress in the renewable energy sector in the United States.
The choice between them depends on several factors, such as the overall cost, project size, amount of available sunlight, type of solar system, and others.
Use the table below to determine the best credit for you.
| Solar Project Features | ITC | PTC |
| Large-scale photovoltaic projects | ✔️ | |
| Smaller photovoltaic projects and CSP (concentrated solar power) | ✔️ | |
| Projects expecting high electricity production | ✔️ | |
| Projects with high installation costs | ✔️ | |
| Projects located in advantageous solar locations | ✔️ | |
| Projects eligible for bonus tax incentives | ✔️ |
Additional Solar Tax Incentives for Businesses
Now, let’s consider other options for commercial solar financing, which are not available only for residential properties, to understand what opportunities and advantages they offer for the development of solar energy in the business and industrial sectors.
Modified Accelerated Cost Recovery System (MACRS)
MACRS is a tax system used in the United States to determine business depreciation expenses. It allows for faster write-offs of the cost of capital assets on tax returns, stimulating investment in new equipment and recovering the cost of assets over an accelerated period.
Unlike ITC, which directly discounts your taxes, MACRS allows you to reduce your taxable income. This means you pay less in taxes rather than receiving a refund.
MACRS allows you to depreciate the cost of your solar power system over 5 years. This means you can deduct a certain percentage of the cost of your system from your taxable income each year.
The incentive is available at the federal level in some states; for example, state commercial solar incentives in California.
An interesting feature of MACRS is the ability to combine it with ITC, thereby increasing the credit amount. Sometimes, the combination of MACRS + ITC can reach up to 70% of the total cost of the solar system.
Bonus Depreciation
Bonus depreciation is one of solar incentives for businesses that allows them to depreciate a large portion of the cost of new capital assets faster than under standard depreciation rules.
Typically, this incentive allows for the deduction of up to 100% of the cost of capital expenditures in the first year of their purchase. This encourages businesses to invest in new equipment and technologies, thereby stimulating economic growth and job creation. This is also a key difference from MACRS (which spreads the depreciation benefit over 5 years).
Note that Bonus depreciation is planned to be phased out gradually by 2027.
| Year When the System Is Commissioned | % of Eligible Asset Value Qualifying for Bonus Depreciation |
| 2023 | 80% |
| 2024 | 60% |
| 2025 | 40% |
| 2026 | 20% |
| 2027 | 0% |
To claim Bonus depreciation and other types of depreciation, businesses must use Form 4562.
The Combination of MACRS and Bonus Depreciation: a Double Tax Advantage
Using MACRS and Bonus depreciation simultaneously can be a financially advantageous strategy and a reliable secret ally in tax management.
Is such a strategy always feasible? No, you must choose between MACRS and Bonus depreciation at the federal level. But here’s the secret: state legislation may allow you to use MACRS even if you are already using Bonus depreciation at the federal level.
Commercial Solar Incentives for Non-Profits
It so happened that until 2022, non-profit organizations (educational institutions, government agencies, ministries, and religious organizations) were denied access to government incentives for commercial solar. Specifically, this was due to their unique financial structure, which primarily relies on government taxes and subsidies.
However, the Inflation Reduction Act passed in 2022 brought changes to this practice, and now non-profit organizations can also qualify for several items from the list of incentives, namely:
1. Direct Payment for ITC
Unlike commercial organizations, which receive a 30% credit, non-profit institutions can receive a payment equivalent to 30% of the total cost of the solar project, including equipment, installation, and other expenses.
Since the direct payment is not a tax credit, organizations cannot carry it over to other years.
2. Credit Transfer
Not all non-profit organizations can benefit from direct payment. Some, such as charitable foundations, do not earn enough money to reap the full benefits of this system.
The Inflation Reduction Act offers an alternative for them: transferring the tax credit. This means the organization can sell its tax credit to another eligible taxpayer.
Typically, the selling price of the credit is lower than its face value.
Benefits of Solar Energy for Non-profit Organizations
By eliminating tax barriers, the Inflation Reduction Act opens up new opportunities for non-profit organizations to utilize solar energy.
- Cost savings
Thanks to direct payment or the sale of tax credits, non-profit organizations can finally reduce their electricity expenses. The saved money can be allocated to other important needs of the organization.
- Reduced dependence on fossil fuels
Solar energy is a clean and renewable source of energy. Consequently, energy generated from it does not harm the environment and does not require the extraction of coal, oil, and other fossil fuels.
- Enhanced reputation
Installing solar panels in Chicago demonstrates the organization’s responsibility to the community and its commitment to environmental conservation. Such an eco-friendly stance is sure to attract new supporters and partners and make you a successful grant applicant.
Initiatives for Solar Enterprises
Commercial solar tax incentives are undoubtedly among the most attractive motivators for implementing solar energy in enterprises. However, this is far from being the only factor that motivates the best solar company in Illinois to install solar panels.
Many states and municipal enterprises offer additional programs and incentives that offset part of the cost of solar systems, providing commercial solar PV finance for each unit of energy they produce.
Solar Renewable Energy Credit
One example of such a program is the Solar Renewable Energy Certificate (SREC) program. Each SREC certifies that 1 megawatt-hour of electricity was generated from a renewable source – the sun. Certificates can be sold on special exchanges, providing companies with an additional source of income.
Not all states support this idea, but Illinois is one of the states that have a solar carve-out program and an SREC market.
In Illinois, solar system owners can receive SRECs through the Illinois Shines program. To obtain a certificate, a solar system must be installed and registered, and then SRECs will be generated automatically.
After that, selling SRECs to brokers (SRECTrade, SolSystems, etc.), electricity providers, or other certificate owners becomes possible. The funds received can be used to recover investments in Chicago solar panels.
Net Metering
The net metering program is a system that allows solar panel companies in Chicago, which generate electricity using solar panels, to sell excess energy back to the grid.
To participate in the program, solar panels must be installed at the enterprise, the system must be put into operation, and the generated electricity must be used to cover the business’s energy needs.
In the event of generating surplus electricity, there is the option to sell the excess back to the grid. Then, the energy solar company in Chicago will compensate for it. The amount of compensation varies depending on:
- Electricity prices in your city
- Energy policies of solar companies in Chicago you collaborate with
- The amount of surplus electricity available for sale
Not all states in the U.S. have net metering policies for municipal services, but Illinois is not affected by this. The program operates in full there.
The best solar companies in Chicago, Illinois, offer net metering. There are many of them, but each has its program with specific conditions. Therefore, there is no universal participation form. For example, ComEd, one of the most well-known energy companies in the state, offers the following participation form.
Ready To Start Working With Solar Energy?
Unfortunately, the claim that you can get free solar panels for commercial buildings in the US is not true. However, plenty of financial incentives will help you reduce the initial investment in Chicago solar panels and save money on bills from day one.
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FAQ
What are the top commercial solar in Chicago incentives available?
The top Illinois commercial solar incentives include the Investment Tax Credit (ITC) and Production Tax Credit (PTC), which provide federal tax credits, as well as the Modified Accelerated Cost Recovery System (MACRS) and bonus depreciation, allowing businesses to recover costs faster through tax deductions.
How do these incentives benefit businesses considering solar energy?
These business solar incentives help companies reduce the cost of installing solar systems and increase their economic benefit. They also decrease electricity expenses, facilitate a faster return on investment, and enhance the company's reputation in the eyes of society.
Are there any eligibility requirements or criteria for accessing these incentives?
Certain criteria must be met to qualify for commercial solar government incentives. For example, to qualify for the ITC, a business must own a solar system, and the system must be connected to the electrical grid for participation in net metering programs. Therefore, to precisely determine all criteria and ascertain whether your business qualifies, it is recommended to contact local solar energy companies in Chicago.
