Modified Accelerated Cost-Recovery System (MACRS) & Bonus Depreciation

Incentive type: 
Renewable Energy
Technologies: 

Solar Water Heat, Solar Space Heat, Solar Thermal Electric, Solar Thermal Process Heat, Photovoltaics, Landfill Gas, Wind, Biomass, Geothermal Electric, Fuel Cells, Geothermal Heat Pumps, Municipal Solid Waste, CHP/Cogeneration, Solar Hybrid Lighting, Anaerobic Digestion, Microturbines, Geothermal Direct-Use

Date: 

Expiration Date of 100% Bonus Depreciation: December 31, 2011

Expiration Date of 50% Bonus Depreciation: December 31, 2012

Sectors: 
Commercial
Amount: 

Depreciation Deductions based on the MACRS class lives for the type of property.  Most renewable energy technologies are classified as five-year property, certain biomass property class life is seven years. 

Eligible property placed in service after September 8, 2010 and before January 1, 2012 quailifies for a 100% first year bonus depreciation. 

A 50% first-year bonus depreciation is available for projects in which the property is placed in service during 2008, 2009, 2010, or 2012. 

Contact Information: 
U.S. Internal Revenue Service
1111 Constitution Avenue, N.W.
Washington, DC 20224

Phone: (800) 829-1040

The MACRS allows businesses to recover investments in certain property through depreciation deductions.   The system includes a set of class lives for certain types of property ranging from 3 to 50 years, over which the property may be depreciated.  Most renewable energy technologies are classified as five-year property, while certain biomass property are classified as seven-year property. 

The five-year depreciation schedule for most types of solar, geothermal, and wind property has been effective since 1986.  The passage of the Energy Policy Act of 2005 allows the five-year schedule to be applied to fuel cells, microturbines, and solar hybrid lighting technologies.  The passage of The Energy Improvement and Extension Act of 2008 further expanded the program to include geothermal heat pumps, combined heat and power, and small wind, and included a 50% first-year bonus depreciation for renwable systems placed in service during 2008, 2009, or 2010.  The Tax Releif Unemployment Insurance Reauthorization, and Job Creation Act of 2010 increased the bonus depreciation to 100% for property placed in service after September 8, 2010 and before January 1, 2012, and 50% for property placed in service in 2012.

For more information on the federal MACRS, see IRS Publication 946, IRS Form 4562: Depreciation and Amortization, and Instructions for Form 4562 on the IRS web site.