Solar electric (Photovoltaic or PV) systems are appearing on farms, businesses, and homes across the United States, in part because they represent an excellent investment, especially in these times of miniscule interest rates for savers. For example, a 54 kW PV system can yield an ROI of 10% with a payback period of just over 9 years.
When the owners of solar electric systems turn a roof or a field into their own electricity-generating plant, they’re locking in their electric costs for decades and adding a possible significant source of income. They are also obtaining a federal tax credit that can be carried forward if unused in the first year and investing in an asset that qualifies for bonus depreciation and a 5 year depreciation schedule, all while not affecting real estate taxes or their maintenance requirements.
Once installed, a solar array should require little if any maintenance for decades while delivering the electricity generated at little to no additional cost. When a solar electric system generates more electricity than the owner needs, the excess goes back into the grid, and the owner receives credit for it. So, not only does adding solar lower or eliminate electricity cost which translates to lower overhead and thus higher margins, it could result in receiving a check from the utility company.
The federal tax benefits of solar are two-fold. In addition to providing relief from tax burden through bonus and other depreciation, there is a 30% Federal Tax Credit. With a tax liability being fully or at least partially offset by this credit, 30% of the cost of solar can quickly be returned to the owner through a reduction of federal tax. This special tax credit allows a farmer to spend 60% of the money to receive the same tax benefit of other farm purchases such as tractors and combines which do not qualify for the federal incentive.