Depreciation on Clean Energy Facilities, Property, and Technology; MACRS

Description

The federal government offers tax programs and resources for cost recovery through depreciation for qualified clean energy facilities, property, and technology. Depreciation is an annual income tax deduction allowing recovery of property costs over its useful life. A key provision related to depreciation of qualified clean energy property is the modified accelerated cost recovery system (MACRS) governed by Provision 13703 of the Inflation Reduction Act of 2022 (IRA).

Eligibility

All owners of qualified facilities, property, and energy storage technologies should review the Internal Revenue Service’s (IRS) detailed instructions on How to Depreciate Property in Publication 946 (2022).

MACRS. For MACRS, qualified facilities include those defined in 26 U.S. Code Section 45Y(b)(1)(A); qualified property includes those defined in 26 U.S. Code Section 48E(b)(2); and energy storage technology includes those defined in 26 U.S. Code Section 48E(c)(2).

How the Program Works

Owners of potentially qualified facilities should review Publication 946. This document provides general rules for depreciating property, covering topics such as depreciable property types, when depreciation begins and ends, methods for depreciation, basis determination, and treatment of repairs and improvements.

MACRS. Owners of qualified facilities, property, and energy storage technology placed in service after December 31, 2024, may be eligible for the 5-year MACRS depreciation deduction under IRC § 168(e)(3)(B).

How to Apply

MACRS. Taxable owners of qualified facilities, properties, or energy storage technologies claim the deduction on Form 4562, Depreciation and Amortization.

Contact Information

Internal Revenue Service (IRS)
1111 Constitution Avenue, N.W.
Washington, D.C. 20224

1(800) 829-1040