Residential installations are no longer eligible for the Solar Energy System Tax Credit.
Business installations that began construction before January 1, 2022 may qualify for the Solar Energy System Tax Credit. Applications are due May 1 for installations completed by December 31 of the previous year.
Important Update on the Solar Energy System Tax Credit
Legislation (Senate File 2367, Division X) signed by Governor Reynolds on June 17, 2022, modified the Iowa Solar Energy System Tax Credit for residential installations completed prior to the 2022 calendar year. This legislation did two things:
The legislation allowed the Department to review applications for residential installations that were both completed prior to the 2022 calendar year and previously denied without review due to the expiration of the residential Iowa Solar Energy System Tax Credit. The Department has completed the process of contacting affected applicants and issuing eligible tax credit certificates related to this legislation.
The legislation re-opened and extended the application deadline for residential installations completed during the 2021 calendar year. Taxpayers who completed a residential solar installation during the 2021 calendar year were eligible to submit an Iowa Solar Energy System Tax Credit application by June 30, 2022.
Residential Solar Energy System Tax Credit applications described above were not subject to the $5 million aggregate annual award limitation under Iowa law. All other installations, including business installations, remain subject to the annual aggregate award limitation.
To request a Solar Energy System Tax Credit, you are required to complete an application. The application must be received by May 1 following the year of the installation of the solar energy system or the application will be denied. Once your application is reviewed, it will either be denied, approved, or updated to waitlisted status (business installations only). An application in waitlisted status shall not constitute a promise binding the state; the credit is contingent upon availability of tax credits for that particular year.
The application for the tax credit is available online using GovConnectIowa. All applications must be entered using GovConnectIowa; paper applications are no longer available.
To submit an application, create a GovConnectIowa Logon. After logging in, navigate to the I Want To... tab and select Apply for a Tax Credit from the Tax Credits panel. You will need to complete all fields on the application and provide the required documents. An installer may complete an application but the taxpayer requesting the credit is required to review and sign the Tax Credit Applicant Certification document required to complete the application.
Residential Installations
Individuals cannot apply for the Iowa credit for residential installations until the installation of the solar energy system is complete.
Qualifying installations must meet the criteria for the federal residential energy efficient property credit related to solar energy provided in sections 25D(a)(1) or 25D(a)(2) of the Internal Revenue Code. The credit amount for a residential installation that occurs after January 1, 2016, was equal to an applicable Iowa credit rate (see table below) up to $5,000. Residential installations placed in service after December 31, 2021, are not eligible for the Iowa credit.
Business Installations
Businesses cannot apply for the Iowa credit until the installation of the solar system is complete and the system is placed in service. Qualifying installations must meet the criteria for the federal energy efficient property credit related to solar energy provided in sections 48(a)(2)(A)(i)(II) or 48(a)(2)(A)(i)(III) of the Internal Revenue Code. The credit amount for a business Installation that occurs after January 1, 2016, is equal to an applicable Iowa credit rate (see table below) up to $20,000. Installations that begin construction after December 31, 2021, are not eligible for the Iowa credit.
For additional information about the Iowa solar energy system tax credit, please consult Iowa administrative rule 701-304.48.
Iowa Solar Energy System Tax Credit Rates for Installations On or After January 1, 2016 Based on 50% of Applicable Federal Rate Under Sections 25D and 48 of the Internal Revenue Code in Effect on January 1, 2016
Applicable Property
Calendar Year Construction Begins
Calendar Year Property Placed in Service
Iowa Tax Credit Rate
Qualified Residential Solar Electric Property Under Section 25D(a)(1) of the Internal Revenue Code
N/A
2016-2019
15%
N/A
2020
13%
N/A
2021
11%
N/A
2022 or later
0%
Qualified Residential Solar Water Heating Property Under Section 25D(a)(2) of the Internal Revenue Code
N/A
2016-2019
15%
N/A
2020
13%
N/A
2021
11%
N/A
2022 or later
0%
Qualified Business Energy Property (electric, heat/cool, solar process heat) Under Section 48(a)(2)(A)(i)(II) of the Internal Revenue Code
2016-2019
2016-2023
15%
2024 or later
5%
2020
2020-2023
13%
2024 or later
5%
2021
2021-2023
11%
2024 or later
5%
2022 or later
2022 or later
0%
Qualified Business Energy Property (fiber-optic solar illumination) Under Section 48(a)(2)(A)(i)(III) of the Internal Revenue Code
N/A
2016
15%
N/A
2017 or later
0%
The invoice or other documentation showing the cost of the installed system.
A copy of the βutility completion sheetβ that you obtain from your utility company.
Verification of the date you began construction and the date the system was placed in service.
The Tax Credit Applicant Certification form that you will complete during the application process.
A copy of all signed agreements made regarding the qualifying solar equipment that verify you are a qualified applicant. For example, provide a copy of your lease agreement if applicable.
Documentation that you meet the separate and distinct rules if you have installed more than one system at the same location or address.
Once your application has been reviewed, the Department may request other documentation necessary to verify you meet the requirements for the type of application you have submitted.
