Solar Installation Business Estimated Taxes: Quarterly Payment Guide

By Yarik Yarosh, CPA ·September 5, 2026 ·3 min read

Written by Yarik Yarosh, CPA (US & Canada) September 5, 2026 · FL CPA license AC61704 · CPA Ontario

Solar installation businesses have two characteristics that make estimated tax planning critical. First, revenue is moderately seasonal, with 50-60% of annual installations happening between April and September (homeowners buy solar during warm months when they see high electric bills). Second, large equipment purchases in Year 1 (boom truck, vehicles, tools) create massive depreciation deductions that may result in little or no tax liability in Year 1, followed by a sharp increase in Year 2 when those deductions are gone. This Year 1 to Year 2 swing is the single biggest tax planning issue for new solar installers.

✓Key takeaway

Estimated tax basics for solar installers:

Set-aside rate: 22-25% of net profit (after materials, labor, and overhead)
Quarterly due dates: April 15, June 15, September 15, January 15
Safe harbor: pay 100% of prior year tax (110% if AGI exceeds $150,000) to avoid penalties, regardless of current year income
Payment method: IRS Direct Pay (irs.gov/payments) or EFTPS
State estimated taxes: paid separately to the state (same due dates in most states)
SE tax threshold: first $176,100 of net SE income is subject to the 12.4% Social Security portion (2025); all SE income is subject to the 2.9% Medicare portion

What does the Year 1 to Year 2 tax jump look like?

Hypothetical example

Round numbers. A solar installer starts an LLC (sole proprietor) and has the following results:

Year 1:

Revenue: $400,000
Materials (panels, inverters, racking): $180,000
Labor (subcontractors): $60,000
Overhead (rent, insurance, marketing): $40,000
Net profit before depreciation: $120,000
Equipment purchased: boom truck ($120,000), box truck ($50,000), tools ($15,000) = $185,000
Bonus depreciation: $185,000
Taxable profit: $120,000 - $185,000 = ($65,000) loss
Tax owed: $0

The $65,000 net operating loss (NOL) carries forward to Year 2 under IRC 172 (limited to 80% of Year 2 taxable income).

Year 2:

Revenue: $500,000 (growth)
Materials: $225,000
Labor: $75,000
Overhead: $50,000
Net profit before depreciation: $150,000
Depreciation: approximately $3,000 (small tool purchases only, all major equipment was fully depreciated in Year 1)
Net profit: $147,000
NOL carryforward applied (80% x $147,000 = $117,600, but only $65,000 available): ($65,000)
Taxable profit: $82,000

Year 2 tax calculation (single filer, sole proprietor):

Self-employment tax: $82,000 x 92.35% x 15.3% = $11,587
Income tax (after SE deduction and standard deduction): approximately $8,400
Total Year 2 tax: approximately $19,987

The jump: $0 in Year 1, $19,987 in Year 2.

If the installer didn’t plan for this, the $19,987 arrives as a lump sum at filing (plus an underpayment penalty of approximately $1,200 for not making estimated payments during Year 2). The total surprise: $21,187.

How to plan for the Year 2 jump: Even though Year 1 tax is $0, the installer should:

Start setting aside 22-25% of net profit in a dedicated savings account during Year 2
Make estimated payments in Year 2 based on projected income (not prior year, since prior year was $0)
Consider timing any large equipment purchases in Year 2 to reduce the taxable income

Quarterly payment schedule (Year 2, targeting $19,987 total):

Q1 (April 15): $5,000
Q2 (June 15): $5,000
Q3 (September 15): $5,000
Q4 (January 15): $4,987
Total: $19,987

Because there’s no prior year tax to base the safe harbor on ($0), the installer must use the current year method. The annualized income installment method (IRC 6654(d)(2)) can help if revenue is seasonal: it calculates each quarter’s payment based on actual income received through that quarter, rather than dividing the annual estimate by 4.

Illustrative numbers only, not a real client and not advice for your facts.

Related guides:

Want this checked against your own situation?

Start with a Diagnostic: a CPA licensed in the US and Canada reads your file and tells you in writing what's wrong and how to fix it, three to four business days after you finish the questions. The report is $250. If you hire us for any work after that, you get the $250 back as a discount on that work. Or send us your return or your letter and get a fixed price, free.

Start a Diagnostic →See prices

Get a fixed price, free

Get the next cross-border guide by email

One or two plain-English guides a week on US-Canada tax. No spam, unsubscribe anytime.

Cite this page

Yarik Yarosh, CPA. "Solar Installation Business Estimated Taxes: Quarterly Payment Guide." Blue Cloud CPA, September 5, 2026. https://bluecloudcpa.com/guides/solar-installation-estimated-taxes

This guide is general information, not tax advice for your specific situation. Which points apply, and how, depends on your facts.