Iowa Solar Rebates and Incentives

How Much Can You Save on Solar in Iowa?

• Homeowners can save on solar system costs with a federal tax credit.
• The Federal Solar Tax Credit for Iowa offers a deduction of up to 30% on solar system costs for residential and commercial properties between 2020 and 2035.
• Net metering allows homeowners/businesses to offset electricity costs by sending extra electricity back to the utility grid in exchange for credits on their electric bill.
• Property owners in Iowa with solar installations may be eligible for property tax exemptions.

Iowa Energy Profile

Iowa receives an average of 2755 sunlight hours. As of 2022, solar installations in the Hawkeye State generated up to 645.7 MW, enough to power approximately 80,929 homes. Iowa also had 72 solar companies offering about 892 jobs.

State and Federal Solar Energy Incentives available in Iowa

As of 2020, Iowa's total energy consumption per capita was 478.6 Million Btu. Residential properties consumed 73.1 Million Btu of energy, while commercial properties consumed 56.9 Million Btu.

How Affordable is Electricity in Iowa?

In 2020, the average cost of solar panels per watt in Iowa was $2.53. As of 2021, the state's average retail cost of grid electricity was 9.13 cents/kWh.

The starting cost for installing a 6kw solar system in Iowa is $14,160. However, homeowners can save up to $4248 on solar system costs with a federal tax credit.

Federal Solar Tax Credit in Iowa

A federal solar tax credit is an incentive that property owners claim on solar system costs. This credit is available for residential and business properties. The Internal Revenue Service (IRS) provides two tax credits for businesses:

• The investment tax credit (ITC): ITC is calculated based on solar system installation cost.
• The production tax credit (PTC): PTC is calculated based on the solar system's electricity.

Commercial property owners cannot claim different credits (ITC and PTC) for the same property. However, they can claim ITC and PTC for co-located systems. The table below shows the value of the federal solar tax credit for residential and commercial properties by installation year:

Iowa's federal solar tax credit does not cover all solar system expenses. For instance, the cost of roof installations in commercial properties is excluded from the federal solar tax credit.

However, the following expenses are covered by the tax credit:

• Solar panels or PV cells costs
• Contractor labor costs for solar system installation, including permitting inspection and developer fees
• Solar equipment costs like wiring, inverters, and mounting equipment
• Cost of solar storage equipment with a capacity rating of 3 and 5 kilowatt-hours (kWh) or greater.
• Sales taxes on eligible solar equipment
• Cost of step-up transformers, circuit breakers, and surge arrestors for commercial properties
• Cost of necessary CSP equipment for commercial properties
• Interconnection property costs for commercial projects with capacity ratings of 5 MW or less

Eligibility

Only solar systems that meet the following criteria are eligible for the federal solar tax credit:

• The solar system is located in the United States or U.S. territories (for commercial properties)
• The residential solar system installation occurred between January 1, 2017, and December 31, 2034.
• The homeowner owns the solar system or bought an interest in an off-site community solar project. Homeowners who lease their solar systems or buy electricity from solar companies are not eligible.
• The solar PV system must be new. Commercial solar systems with limitedly used equipment are eligible.
• The commercial solar system must not be leased to a tax-exempt entity.

Individuals eligible for the federal solar tax credit can also apply for Iowa solar panel tax credit. The Iowa tax credit for solar panels is a percentage of the applicable federal credit.

How do I claim the Federal Solar Tax Credit in Iowa?

Homeowners can claim the federal solar tax credit in Iowa with several quick steps:

Step 1. Determine eligibility

Individuals cannot claim federal solar tax credits for solar systems installed in rental properties. Only property owners with properties in the United States or U.S. territories can claim it. Review the resources available on the U.S. Department of Energy Solar Energy Technologies Office (SETO) website for more information on federal tax eligibility criteria.

Step 2. File the appropriate forms

The form to file for federal solar tax credit varies depending on the property. Homeowners would be required to file IRS Form 5695 alongside the federal tax return form (Form 1040 or Form 1040NR) with the IRS. File IRS Form 3468 to claim ITC and IRS Form 8962 to claim PTC.

Net Energy Metering in Iowa

Net metering in Iowa allows homeowners to receive credit for any excess energy generated by an installed solar energy system. Per Iowa Code §476.49, the electricity generated by the homeowner helps offset electricity that should have been bought from the electric utility.

In 2020, SF 583 legislation was enacted in Iowa that substantially changed net metering laws. It requires utility companies to file new net metering tariffs via net billing or inflow-outflow method.

In net billing, the distributed generation customer pays all charges associated with the energy exported to the utility company during the billing period. These charges include the riders approved by the Iowa Utilities Board (IUB) for the customer's electricity.

The charges are credited in kilowatt-hours and can be used to offset kilowatt-hours in future billing periods. In the inflow-outflow billing method, the distributed generation customer is credited in dollars at the outflow purchase rate for energy exported to the grid. The dollar credits can be used to offset volumetric charges billed on a kilowatt-hour basis in future billing periods.

How to Enroll for Net Energy metering in Iowa

Individuals can enroll for net energy metering at Iowa's two investor-owned utilities, MidAmerican Energy and Interstate Power and Light (IPL).

Net metering requests can be made in person or by mail. Requesters must fill out application forms and sign Interconnection Agreements before they can be allowed to construct a distributed generation facility. After construction, the utility company will install a bi-directional meter in the customer’s facility.

Iowa Property Tax Exemption

Per Iowa Code § 441.21(8), a solar energy system installed on an agricultural, commercial, residential, or industrial property is exempted from property tax for 5 years.

In compliance Iowa Code § 427.1(38) and 701 IAC 110.29(427), residential geothermal systems are exempted from property taxes for 10 years. Eligible systems include:

• Solar systems that can collect and convert wind energy and solar radiation into other energy forms. These energy forms include electrical, mechanical, and thermal energy, which are transformed by separate apparatuses to storage or a point of use which was constructed or installed after the 1st of January, 1978.

• Solar systems that use basic building designs to minimize and maximize solar heat gains during hot and cold seasons. The systems should be able to use natural means to collect, store, and distribute solar energy constructed or installed after January 1, 1981.

• A residential geothermal system (new or retrofitted) installed on or after July 1, 2012. Property tax exemption also extends to the equipment, labor, and expenses required for the construction or installation of the geothermal system.

Property assessors disregard the market value solar systems add to properties. An individual who wants to claim the geothermal system exemption must file a Geothermal Heating & Cooling System Property Tax Exemption form with the city or county assessor. This form must be filed by February 1st of the first assessment year that the exemption is requested.

Iowa Solar Energy System Tax Credit for residential installations

Per 701—304.48(422), the Iowa Department of Revenue provides solar energy system tax credits to residential and business property owners. The Iowa solar renewable energy tax credit is a percentage of the applicable federal credit under the Internal Revenue Code §25D and §48.

Iowans who qualify for the state credit must qualify for and claim the corresponding federal credit. To be eligible for the solar energy system tax credit, individuals must have the following:

Residential solar installations

Only homeowners with complete solar system installations can apply for the Iowa credit for residential installations.

Per Internal Revenue Code §25D(a)(1)-(2), the credit will be an amount equal to the sum of the applicable percentages of the qualified solar electric and water heating property expenditures made by the taxpayer during the tax year.

Residential solar installations placed in service after December 31, 2021, do not qualify for the Iowa tax credit. The table below shows the Iowa tax credit rate for eligible residential installations per year:

Business installations

Businesses are only eligible for Iowa solar energy system tax credit after the solar system installation is completed and placed in service. Per IRC §48(a)(2)(A)(i)(II)-(III), such a business must have equipment that uses solar energy to:

• Generate electricity, heat/cool, or provide solar process heat.
• For fiber-optic solar illumination.

The table below shows the Iowa tax credit rate for eligible business installations per year:

Eligible individuals can apply for solar energy system tax credits online. To apply, go to the right-side menu and click “Create a Logon.” After creating an account, log in with a username and secured password. Go to the "I Want To…" tab and select "Apply for a Tax Credit" from the Tax Credits panel.

Complete all required fields on the application and upload the following documents:

• An invoice or other documentation that shows the solar system installation cost.
• A copy of the “utility completion sheet” obtained from the utility company.
• Verification of the construction start date and the date the system was placed in service.
• The Tax Credit Applicant Certification form (would be completed during the application process)
• A copy of all signed agreements regarding the qualifying solar equipment for qualified applicant verification
• Documentation that shows that the applicant meets the separate and distinct rules for multiple system installations at the same location or address.
• Other documentation requested by the Department.

All applications must be received by May 1, following the year of the solar energy system installation. Once applications are received, the Department can deny, approve, or update them to waitlisted status (business installations only).

State Sales Tax Exemptions in Iowa

Per Iowa Code §423.3(90, solar energy equipment is exempted from sales tax. Such equipment includes inverters, energy transmission devices, panels, and solar roof tiles or shingles. The following solar equipment is excluded from sales tax exemptions:

• Battery or other storage points
• Equipment used for protecting solar equipment like fence
• Equipment not used to collect, convert, or transmit solar energy
• Materials used to manufacture, install, construct, or mount solar energy equipment
• Equipment used to support solar energy equipment installations

The rate of Iowa sales and use tax on solar energy equipment is 6%. The solar equipment purchaser must complete an Iowa Sales/Use/Excise Tax Exemption Certificate form and give it to the seller. The seller must keep the form as proof that a sales tax exemption was claimed. The tax exemption certificate expires after 3 years.

Renewable Energy in Iowa

In 2021, about three-fifths of Iowa’s electricity came from renewable resources like wind, solar, hydroelectric power, and biomass.

Wind power accounted for 58% of renewable energy generation. Iowa was the second-largest wind power producer in the U.S. Iowa's wind power was expected to increase to 1,000 megawatts in 2022.

About 2% of Iowa's electricity generation came from other renewable energy resources such as hydroelectric power, solar energy, and biomass. The largest hydroelectric power plant in the state produced 146 megawatts of electricity. In early 2022, utility-scale power facilities produced about 12,300 megawatts of renewable energy.

The top fuel ethanol-producing state in the United States is Iowa. Yearly, Iowa ethanol plants produce about 4.7 billion gallons of fuel ethanol. The raw materials used in most ethanol plants are obtained from fertile cornfields.

Iowa Household Profile

According to 2021 Census Estimates, Iowa is home to over 3.2 million people. As of 2021, Iowa had nearly 1.5 million housing units, with 71.6% of them owner-occupied and 28.4% renter-occupied. That same year, City/County Building Departments issued 13,686 building permits to enforce the building codes and guide building projects.

Between 2017 and 2021, there were 1.2 million households in Iowa, with 2.42 persons per household.