How Iowa Homeowners Can Find Solar Power Tax Incentives in 2024

Iowans invested an estimated $150 million in solar power in 2023, a number that’s expected to grow significantly over the next several years. While that number includes commercial, residential, and utility projects, Iowa homeowners make up a growing share of the state’s new solar projects.

One of the reasons more Iowa homeowners are turning to solar is the availability of tax incentives like the federal solar investment tax credit. These incentives help them reduce costs and more easily tap into solar energy as a way to offset their electricity use and promote environmental sustainability.

Tax benefits for solar energy come from a variety of sources at the federal, state, and local level. For homeowners just starting on their solar journey, it can be hard to know where to look. That’s why at 1 Source Solar, we help residential homeowners in Iowa every day with the process of adopting solar power for themselves, while finding options that fit their budget.

If you’re an Iowa homeowner, here’s a look at where to begin when you’re searching for tax incentives.

The Federal Solar Investment Tax Credit

The nationwide solar investment tax credit gives solar users up to a 30% dollar-for-dollar credit for the cost of installing their solar systems. That means if your solar system costs $20,000, you’ll receive a $6,000 credit on your federal income taxes, bringing your taxes due down by that amount.

The credit program covers a variety of expenses involved in solar panel installation including the panels themselves, labor costs, and battery energy storage systems.

You can benefit from this tax credit if:

• You own your solar energy system.
• The system is installed on your primary or secondary residence.
• The system is put in service during the tax year.

How to receive this incentive: Claim the Residential Clean Energy Credit on your tax return in the tax year the solar system was constructed. The IRS has step-by-step instructions on its website.

Question: What if the 30% credit exceeds my tax liability for the year?

Good news: You will save 30% of the cost of your system no matter what. In our example of a $20,000 installation from above, if you only owe $1,000 on your taxes that year, then the rest of your tax credit ($5,000 in this example) will carry over and work as a credit on next year’s taxes.

Beyond Federal Tax Credits: Iowa State Incentives for Homeowners

Unlike the federal government, Iowa does not offer an income tax credit at the state level. However, there are other incentives that homeowners can take advantage of with their new installations. Those include net metering and exemptions from the state sales tax and local property taxes.

Net Metering in Iowa

Net metering allows homeowners with solar panels to sell excess electricity they generate back to the utility company. The utility company will credit your account for the electricity you send back to the grid, which can significantly reduce your monthly electricity bill.

Iowans who are customers of the state’s two regulated electric utilities, MidAmerican Energy Company and Interstate Power & Light Company (Alliant Energy), are eligible to participate in net metering programs. Users of community electric utilities or cooperatives should check with their individual utility for information.

How to receive this incentive: Discuss with your solar installer up front what you will need to tap into net metering. You may need a specific type of meter installed that is compatible with net metering and may need to apply to your utility to receive approval for your net metering program.

Iowa Solar Tax Exemptions

Iowa does not collect sales tax on the purchase of solar equipment, meaning homeowners are exempt from paying an additional 6% on their equipment — or 7% if they live in an area with a local option sales tax.

Installing solar panels can raise the assessed value of a home, which is why Iowa also exempts properties that install solar from paying additional property taxes for five years following the installation of the solar system.

How to receive this incentive: This incentive is typically automatic. However, you can confirm your property tax benefit with your local county assessor’s office if you have questions.

The Impact of Solar Tax Incentives in Iowa

Over the years, we’ve helped a number of residential homeowners save money with solar. For example, we worked with this residential home in Slater, Iowa, to install 44 rooftop solar panels with a capacity of 13.6 kW — accounting for 100% of the home’s annual usage. Thanks to the federal solar tax credit, the payback period for this solar installation is nine years.

This is one example of many homes we’ve worked on across the state that have benefited from local incentives. Want to learn more about how we can help you? Take a look at our projects page.

Looking for More Information on How to Go Solar? Contact the Experts at 1 Source Solar!

The combination of the federal solar investment tax credit and Iowa’s tax exemptions can significantly reduce the upfront cost of installing a solar system, making solar power a more accessible and attractive option for Iowa homeowners. Not only will you save money on your electricity bills and reduce your carbon footprint, but you’ll also be contributing to Iowa’s growing clean energy sector.

If you’re interested in learning more about how solar power can benefit your home and how you can take advantage of these valuable tax incentives, you can find an overarching guide on available tax incentives both nationwide and in your state, at our Guide to State and Federal Solar Incentives page.

You can also contact 1 Source Solar today! Our team of experts will help you navigate the process of going solar and design a system that meets your energy needs and budget.