Solar panel technology is nothing new. However, advancing technology and a concern for the environment created a wide push to adapt to more renewable energy sources. Many electric utility companies are developing or relying more heavily on wind farms, water-powered energy, and farms of solar panels. Some of them are offering credits to consumers for installing solar panels on their property and allowing them to buy any excess energy generated.
As a car dealership, there are several benefits to converting to a renewable energy source, such as solar panels. Keep reading to discover why switching to solar now is in the best interest of your dealership.
The Solar (Panel) Benefit
The clean energy movement garnered a lot of attention, from the folks on Capitol Hill to everyday citizens. Let’s explore how this affects your dealership converting to social energy.
The tax benefit: The Investment Tax Credit has been around for a few years but, there is still time to receive a large tax credit on funds spent installing a solar panel system at your dealership. In December 2020, Congress extended the 26% tax credit rate as long as your solar panel system is under construction by 2022 and in service by the end of 2025. Once the extension expires, the tax credit will drop to 10%. As with most credits, there are some qualifications and exclusions. Depending on your tax situation, the solar panels are also eligible for 100% bonus depreciation expensing through 2022. If bonus depreciation does not work for you the panels are still eligible to be depreciated over a five-year tax life. Be sure to talk with your CPA using this contact form as you research solar panel options.
The cost savings: While there can be a significant investment involved in switching to clean solar energy, several dealerships reported significant expected cost savings. One dealership network in the Midwest recognized an estimated savings greater than $2 million over 25 years. Another west coast dealership group’s cost analysis shows their investment paying itself back within 4 years and a savings of $3.8 million across 25 years. While there may be some maintenance and repair costs, most commercial-grade systems are expected to last 40 years. That’s 40 years of cost savings including powering your dealership lights, air conditioning and heating, computer systems and Wi-Fi, and more.
The social clout: When companies invest in projects and causes that are important to the people who live and work in the area, the greater community takes notice. Several dealerships reported an increase in sales since they switched to solar power, with consumers reporting the solar panels as the reason they chose that dealership over competitors in the area.
Solar may seem like a significant investment; however, there are significant cost savings and sales benefits as well. If your dealership is considering switching to solar power or looking for additional ways to decrease monthly overhead, give our team a call to talk through the potential impact on your dealership’s tax liability and cost savings.
Councilor, Buchanan & Mitchell (CBM) is a professional services firm delivering tax, accounting and business advisory expertise throughout the Mid-Atlantic region from offices in Bethesda, MD and Washington, DC.