Confusion around solar incentives is common as residential ITC phases down. Many business owners assume federal benefits are gone, but the commercial solar tax credit and other incentives still cut costs, boost cash flow, and deliver long-term savings.
The 30% Investment Tax Credit for Commercial Solar
The federal Investment Tax Credit (ITC) allows eligible businesses to claim a tax credit equal to 30% of the total cost of a commercial solar system. This includes solar modules, inverters, racking, balance-of-system components, installation labor, and associated electrical work. Unlike a tax deduction, which only reduces taxable income, the ITC reduces federal tax liability dollar for dollar, providing an immediate financial impact.
Businesses across Texas, from offices to warehouses, can benefit from this. Office buildings may install rooftop solar to offset daytime energy use, warehouses data centers, and distribution centers can install large PV arrays to cover high energy loads, and hotels or multifamily properties can use solar to reduce costs for common areas. Manufacturing facilities can pair solar with energy storage to lower peak demand charges.
Bonus Depreciation and How It Works with the Commercial Solar Tax Credit Texas Businesses Use
Bonus depreciation allows taxable Texas businesses to accelerate cost recovery on qualifying commercial solar property. This incentive works in addition to the federal Investment Tax Credit and does not replace it.
Under federal tax rules, a business that places a qualifying commercial solar energy system in service may first claim the Investment Tax Credit (ITC) equal to a percentage of eligible project costs. After the ITC is applied, the remaining adjusted tax basis of the system may be depreciated under the Modified Accelerated Cost Recovery System (MACRS). Bonus depreciation, when available, allows a portion of that remaining basis to be deducted earlier than it would be under standard MACRS schedules.
How the ITC and Bonus Depreciation Interact
From a tax perspective:
- The ITC provides a direct credit against federal income tax liability
- The system’s depreciable basis is reduced in accordance with IRS rules after the ITC is claimed
- The remaining basis is depreciated under MACRS
- Bonus depreciation accelerates a portion of those depreciation deductions into earlier tax years
Bonus depreciation affects the timing of deductions, not the total amount depreciated over the life of the asset.
Important Planning Considerations
Bonus depreciation and depreciation basis calculations must follow IRS guidance and depend on factors such as system ownership, entity type, and tax appetite. Bonus depreciation is generally available only to taxable entities and may not apply to tax-exempt organizations unless paired with specific ownership or financing structures.
Because depreciation rules are technical and subject to change, businesses should consult qualified tax professionals when evaluating projected benefits.
Good Faith Energy works with Texas businesses to coordinate commercial solar projects alongside available federal incentives, utility programs, and proper project structuring to support compliant, long-term financial outcomes.
MACRS Depreciation and Commercial Solar Projects in Texas
Under the Modified Accelerated Cost Recovery System (MACRS), businesses can recover investments in certain property, including solar, through structured depreciation over time. For commercial PV systems, the taxable basis of the equipment must be reduced by 50% of any federal tax credits claimed, including the ITC.
Even with this basis adjustment, MACRS provides valuable deductions that complement both the ITC and bonus depreciation. Together, these programs create a layered incentive structure that substantially lowers the effective cost of commercial solar installations.
ONCOR Incentives for Commercial Solar in Texas
ONCOR offers the Commercial Solar Program, paying incentives directly to approved service providers for qualifying photovoltaic installations at businesses. Programs typically run from February through November annually.
A medium-sized warehouse installing a 500 kW PV system may qualify for substantial rebates through approved providers. The exact rebate amount depends on program funding and pre-approval requirements, so early coordination with ONCOR and participating installers is essential to maximize eligibility.
How NEVI and Texas Alternative Fueling Grants Support EV Infrastructure
As electrification grows, Texas is tapping federal and state programs to expand electric vehicle charging infrastructure across the state.
National Electric Vehicle Infrastructure (NEVI) Program
The NEVI Formula Program was created under the Infrastructure Investment and Jobs Act to build a connected network of EV charging stations along designated corridors. In Texas, this program is administered by the Texas Department of Transportation (TxDOT) and focuses on equipping highways and key travel routes with dependable EV charging. The initiative aims to ensure long-distance EV travel is more reliable, helping both residents and businesses adopt electric transportation.
Texas Emissions Reduction Plan (TERP) and AFFP
In addition to NEVI, the Texas Commission on Environmental Quality (TCEQ) manages the Alternative Fueling Facilities Program (AFFP) through the Texas Emissions Reduction Plan (TERP). The AFFP provides competitive grants to help construct or expand alternative fueling infrastructure, including electric charging stations, in eligible areas known as the Clean Transportation Zone.
Applications have periodically opened for sites that include charging infrastructure along key corridors, and public access facilities are prioritized in funding reviews.
Why This Matters for Solar + EV Projects
For commercial and mixed-use developments, stacking solar generation with EV charging infrastructure can not only reduce operating costs but also leverage public funding for both clean electricity and transportation. NEVI funding helps ensure EV charging is available along major travel corridors, while state TERP grants like AFFP can help offset installation costs for publicly accessible charging stations.
Timing and Installation Strategy
Timing is critical for businesses seeking to maximize incentives. Tax benefits and utility rebates are contingent upon:
- Installation and placement-in-service dates within the qualifying tax year
- Pre-approval from utilities for rebate programs
- Documentation of all eligible expenses
Starting the process early allows time for system design, permitting, electrical upgrades, and coordination with accountants and installers. Waiting too long may result in missed incentives or delayed tax benefits.
Examples for Different Business Types
Office Buildings: Rooftop solar arrays offset daytime energy use for employees and common areas. A 100 kW system may qualify for a $30,000 ITC credit and additional bonus depreciation.
Warehouses and Distribution Centers: Large rooftop areas can accommodate high-capacity arrays. Pairing solar with battery storage reduces peak demand charges, while utility rebates offset infrastructure upgrades.
Hotels and Multifamily Properties: Solar can power common areas, HVAC systems, or lighting. By combining commercial solar incentives with bonus depreciation, these properties can see a significant reduction in net project costs.
Fleet Operators: Solar paired with charging infrastructure helps offset electricity costs for EV fleets, while federal and utility incentives reduce upfront installation expenses.
Solar Tax Credits for Nonprofits and Tax-Exempt Organizations
Nonprofits, schools, churches, municipalities, and other tax-exempt organizations can now benefit from federal solar incentives even if they do not pay federal income taxes. Under the Inflation Reduction Act, eligible tax-exempt entities can take advantage of the Direct Pay option, also referred to as “elective pay.”
How Direct Pay Works for Nonprofits
Instead of needing tax liability to use the Investment Tax Credit, qualifying nonprofit organizations can receive the value of the federal solar tax credit as a cash payment from the IRS after the system is placed in service.
For most nonprofit solar projects, this means:
- Up to 30% of total eligible project costs returned as a direct payment
- No tax appetite or third-party ownership required
- Full system ownership remains with the nonprofit
- Incentives can still be combined with local utility rebates and grants
Eligible Organizations
Direct Pay is available to many tax-exempt entities, including:
- 501(c)(3) nonprofit organizations
- Schools and universities
- Churches and faith-based organizations
- Cities, counties, and municipal facilities
- Public utilities and cooperatives
Why This Matters
Historically, nonprofits relied on third-party solar ownership models to access incentives. Direct Pay allows organizations to install solar using capital, grants, or financing while still capturing the full federal incentive value, improving long-term savings and energy independence.
Here at Good Faith Energy, we work with nonprofit and public-sector organizations across Texas to structure solar projects that maximize Direct Pay eligibility while layering available utility and state incentives wherever possible.
Long-Term Financial Benefits Beyond Tax Incentives
While incentives improve upfront economics, commercial solar provides ongoing value:
- Predictable energy costs and protection from rate increases
- Reduced carbon footprint and improved sustainability reporting
- Employee satisfaction and improved marketability for tenants and customers
- Long-term ROI often exceeds incentive value alone
Commercial solar also supports EV adoption for company fleets, further integrating energy and transportation savings into operational planning.
When Solar Tax Credits Can Reach 70%
Certain affordable housing and HUD-backed solar projects may qualify for significantly higher federal solar incentives than the standard Investment Tax Credit. When multiple bonus programs are stacked correctly, total federal credits can reach as much as 70% of eligible construction costs.
This opportunity applies primarily to Low-Income Residential Housing projects, public or nonprofit developers, and projects located in qualifying areas.
How the 70% ITC Is Reached
Under current federal rules, solar projects can stack the following incentives when all criteria and allocations are met:
- Base Investment Tax Credit (ITC): 30%
- Domestic Content Bonus: +10% (Applies when U.S.-manufactured steel, iron, and components meet federal thresholds)
- Energy Community Bonus: +10% (Available for projects located in qualifying fossil fuel transition or energy-impacted areas)
- Low-Income Residential Housing Bonus (High Tier): +20% (Applies to HUD and qualifying low-income housing projects that meet affordability and tenant benefit requirements)
Maximum potential federal ITC: up to 70% of total eligible project costs.
Why This Matters for Affordable Housing and Public Projects
For HUD properties, affordable housing developers, and mission-driven organizations, this incentive stacking can dramatically reduce upfront solar costs while improving long-term operating margins. When combined with accelerated depreciation or Direct Pay for tax-exempt entities, solar becomes one of the most capital-efficient upgrades available.
Projects that qualify for multiple adders often see:
- Faster payback periods
- Stronger financing options
- Greater long-term energy cost stability
- Higher project feasibility without third-party ownership
Important Notes on Eligibility
Not all projects automatically qualify for every bonus. Low-income adders are subject to annual allocation caps and application approval, and domestic content requirements must be met and documented. Proper project structuring is critical to capturing the full incentive value.
Good Faith Energy helps commercial, nonprofit, and affordable housing clients evaluate eligibility, confirm incentive stacking opportunities, and design systems that maximize available federal and local benefits.
Tips for Maximizing Incentives
- Combine incentives: Stack Austin Energy, ONCOR, federal ITC, and bonus depreciation wherever possible.
- Pre-wire for future expansion: Installing conduit and spare electrical capacity reduces retrofit costs later.
- Incorporate smart monitoring: Managed systems can optimize usage and may qualify for additional incentives.
- Plan early: Capture rebates and tax benefits without schedule pressure.
- Document everything: Keep detailed records of labor, installation costs, and electrical upgrades to ensure compliance.
Commercial Solar Tax Credit Texas Solutions with Good Faith Energy
Commercial solar projects are designed to maximize every available incentive. From navigating the commercial solar tax credit Texas to coordinating bonus depreciation, MACRS, and utility rebates, each project is structured for maximum financial benefit.
Contact Good Faith Energy for commercial solar installation. Schedules fill up quickly, especially later in the year. Early planning ensures businesses capture all incentives and receive installations on time, avoiding missed deadlines. With the right approach, commercial solar becomes a strategic investment that saves money, improves sustainability, and prepares a business for future energy needs.
Fact Checked by Lisa Musser