Businesses can now take advantage of Canada’s solar tax credit for up to 30% off the cost of a solar panel installation project. The Clean Technology Investment Tax Credit (ITC) was introduced to support Canada’s shift towards a low-carbon economy. Similar to a rebate, this refundable tax credit encourages businesses to invest in clean technologies, like solar panels, by providing up to 30% back on capital costs.
Who is eligible?
To be eligible for the Clean Technology Investment Tax Credit, your business must meet a few key requirements:
- Be a Taxable Canadian Corporation: Only Canadian corporations are eligible for this credit. Individual taxpayers, condo corporations and non-profits don’t qualify.
- Qualifying Clean Technology: The investment must be in eligible clean technologies, such as solar panel systems, that generate or store clean energy.
- Installation Date: Eligible equipment must be acquired and become available for use between March 28, 2023 and December 31, 2034. The ITC may be used retroactively for systems put into operation as early as March 28, 2023.
- Labour Requirements: To receive the full credit rate of 30%, businesses must meet certain labour requirements, which include paying prevailing wages and employing apprentices. If these requirements are not met, the credit rate will drop by 10%. More information about the labour requirements can be found here.
- Other: The solar panels must be installed in Canada and generate energy for a business property within the country.
How do I claim the Tax Credit?
Claiming the Canada’s Solar Tax Credit requires businesses to maintain proper documentation and follow specific filing steps:
- Keep Records: Make sure you hold onto receipts, invoices and any proof of payments for your solar installation.
- File on Your Corporate Tax Return: You’ll claim the tax credit directly on your business’s annual tax return.
- Include Additional Documentation: The Canada Revenue Agency (CRA) will require supporting documents. Attach these to the corporate tax return, as instructed.
- Engage a Compliance Consultant: To ensure eligibility for the full 30% tax credit rate, the project must meet specific labor requirements. We recommend working with a consulting firm experienced in project labor compliance. Our team is here to assist if you need guidance on finding a firm to work with.
More details on how to claim the Clean Technology ITC can be found here.
How can Canada’s Solar Tax Credit benefit my business?
The Clean Technology ITC allows businesses to claim a 30% refundable tax credit on the capital costs of solar panel systems. As a refundable credit, if the credit amount exceeds your business’s tax payable, the difference will be refunded to your business in the form of a cheque or direct deposit. This allows for the ITC to benefit businesses of all sizes.
The following example shows how the ITC can be used:
The Accelerated Capital Cost Allowance
Along with the Clean Technology Investment Tax Credit, the Canadian government provides businesses the opportunity to lower the book value of a solar project more quickly, enabling them to reduce taxable income earlier in the project’s life. This is known as an accelerated Capital Cost Allowance (CCA). This incentive allows businesses to depreciate solar equipment at an accelerated rate of 30% under CCA Class 43.1.
Solar panels installed after November 20, 2018, and before 2028 are also eligible for an enhanced first-year allowance. Businesses that purchase and start using eligible solar equipment in 2025 can deduct 75% of the cost in the first year. For equipment placed in service in 2026 or 2027, the first year depreciation is 55%. More information on the accelerated CCA for solar panels can be found here.
Continuing with our example above, the accelerated CCA for equipment placed in service in 2025 would look like this (assuming a corporate tax rate of 27%):
Next Steps
As a broker of solar panel quotes, Glean’s primary service is to deliver business owners 3 solar quotes from our vetted network of solar panel installers as well as unbiased advice to help you choose the best installer.
If you’d like to explore the possibility of taking advantage of these tax incentives with a solar panel installation on your business property, fill out your information below and we will be in touch with next steps: