HOMER Grid 1.10
Capital based incentives apply to the capital cost of the components. This could either be a tax deduction or a credit or both.
In HOMER Grid, you can apply a capital based incentive to the following components:
•Solar
•Storage
Below is an explanation of the various inputs in capital based incentive
Variable |
Description |
Percent deduction (%) |
Tax deduction as a percent of the capital cost |
Maximum deduction |
Maximum deduction limit |
Percent credit (%) |
Tax credit as a percent of the capital cost |
Credit per kW (per kWh for storage) |
Additional credit per kW/kWh of installed capacity |
Maximum credit |
Maximum credit allowed |
Eligible percent (%) |
Portion of capital cost eligible for incentive |
Marginal tax percent (%) |
The percent of tax applicable |
Credit is taxable |
Select this option if the credit is reduced by the marginal tax rate |
Reduces tax basis |
Select this option if deduction and credit reduces the tax basis (cost basis) |
Applies to |
The components that this bonus depreciation applies to |
Below are two examples of capital based incentives:
Example 1
Let us consider a PV system of 100 kW which has a total capital cost of 100,000$. If the capital based incentive applied to this PV system is:
This would mean that the tax credit applied to the system is = 50% of capital cost = 0.50 * 100,000$ = 50,000$
Additional credit per kW of installed capacity = 1 $ * 100 kW (installed capacity) = 100 $
Total credit = 50,000$ + 100$ = 50,100$
Since the "Credit is taxable" is selected, the marginal tax rate is applied to this credit = (1 - 0.35) * 50,100 $ = 32,565 $
Total Capital based incentive = 32,565 $
Example 2:
Let us consider a PV system of 100 kW which has a total capital cost of 100,000$. If the capital based incentive applied to this PV system is:
This would mean that the tax credit applied to the system is = 50% of capital cost = 0.50 * 100,000$ = 50,000$
Additional credit per kW of installed capacity = 1 $ * 100 kW (installed capacity) = 100 $
Total credit = 50,000$ + 100$ = 50,100$
Since the Tax deduction is 50 % of capital cost = 0.50 * marginal tax rate * capital cost = 0.50 * 0.35 * 100,000$ = 17,500$
Total deduction and credit = 17,500 + 50,100 $ = 67,600 $
