Get a 45% rebate on a home solar installation in Iowa
Residents of Iowa have some of the best home solar incentives in the country.
Iowa: big rolling hills, sunny skies. Also, lots of land for solar panels!
If you live in Iowa, you’ll be pleased to know that your state has some of the best solar incentives in the nation.
This is in large part due to the state income tax credit, but there are other incentives that have an impact, such as property tax and sales tax exemptions. Read on to learn more.
Summary of solar rebates available to Iowa residents:
|Federal tax credit||30% off system price through 2019|
|Iowa Department of Revenue Solar Energy System Tax Credit||50% of the value of the federal tax credit|
The big rebate in Iowa is the state tax credit. It’s indexed to be 50% of the federal tax credit. In 2019, the federal tax credit is 30% off the gross system costs, but in 2020 it will drop to 26%, 22% in 2022, and 0% (for residential solar) after 2022.
This means that the Iowa tax credit is 15% off in 2019, but will drop to 13% in 2020, and continue to drop as the federal tax credit drops. Here’s a table that summarizes it:
Iowa Solar Energy System Tax Credit by year
|Date installation completed||Rebate|
|up to 12/31/2019||15%|
|calendar year 2020 and 2021||13%|
|calendar year 2022||11%|
Important details about the Iowa Solar Energy System Tax Credit
- You must qualify and apply for the Federal tax credit. The Iowa state tax credit is indexed to the federal tax credit, so you must qualify for the federal program if you want to receive the state credit too. IRS Form 5696 is the form to use for the federal credit.
- Both solar photovoltaic panels and solar thermal are eligible. Solar electric panels are the most popular choice, but solar hot water heating systems are also eligible.
- The maximum Iowa tax credit is $5,000. Even if the Iowa tax credit calculation would theoretically be more, there’s a hard cap on the maximum rebate.
- The Iowa credit will expire when the federal credit does. This means that when the federal tax credit ends in 2022, the Iowa credit will too.
- Excess credits can be carried forward. It’s possible that your Iowa solar tax credit will reduce your state tax owed to zero. If that’s the case, don’t worry: you can roll over your unused credits for as many as ten years, until your credit is used up.
- Your application for the tax credit must be received by May 1. If you install a solar panel system this year, you must file your claim for the tax credit by May 1 of the following year in order to qualify.
Yearly program cap
The Iowa Solar Energy System Tax Credit program has a maximum program budget of $5 million, after which no more tax credits will be given out. This is a popular program, so in recent years the budget has always been hit.
At the time of writing, the 2019 budget has already been met.
When the program budget for the year has been exhausted, you can still apply. Your application will go into a waitlist in the order that it was received, and hopefully you will be able to claim your credit from the next year’s program budget.
If the program expires before you get off the waitlist, you won’t receive any money. In addition to the dropping tax credits, this is a good reason to act fast.
Other Iowa tax credits
Property tax exemption
Iowa is one of the states where the installation of a solar panel system won’t cause your property taxes to rise - in the case of Iowa, the exemption lasts for 5 years.
While this doesn’t affect the upfront price of your solar system, it’s still a big deal. The gross price of a PV system is often in the range of $15,000 or so. Normally, a renovation like this would increase your house assessment, causing your property taxes to rise.
But with a property tax exemption, the value of the solar system doesn’t get added to your home’s assessed value, preventing your taxes from increasing. While on a yearly basis the value of this is relatively small, it really adds up over time.
You can read my article about solar property tax exemptions to learn more.
Iowa sales tax exemption
The state sales tax in Iowa is 6%, but solar energy equipment is exempt from this, giving you a nice rebate right off the top. (Note that some muncipalities may have a local sales tax on top of this that may or may have a solar exemption).