Iowa Solar Energy System Tax Credits

The Iowa Department of Revenue has announced its process to implement new 2012 legislation for solar energy system tax credits.

Senate File 2342, which was signed by Governor Branstad on May 25, 2012, provides for an Iowa income tax credit for solar energy systems installed on property located in Iowa. This tax credit applies retroactively to January 1, 2012, for tax years beginning on or after that date. The credit is not refundable, but any credit in excess of the tax liability can be credited to the following ten tax years. The solar energy system must be placed in service on or after January 1, 2012, but before January 1, 2017, to be eligible for the credit.

The credit is computed as follows:

  • 50% of the federal residential energy efficient property credit* related to solar energy provided in sections 25D(a)(1) and 25D(a)(2) of the Internal Revenue Code, not to exceed $5,000 [update].
  • 50% of the federal energy credit* related to solar energy provided in sections 48(a)(3)(A)(i) and 48(a)(3)(A)(ii) of the Internal Revenue Code, not to exceed $20,000 [update].
  • A business operated out of your home will only be eligible for the individual credit. The maximum amount that will be awarded is $5,000 [update].
  • We follow federal guidelines for what qualifies as a business.

The aggregate amount of credits awarded per calendar year is capped at $1.5 million. As such, the Department will implement a process for eligible taxpayers to reserve the credit after the solar energy systems have been placed in service. The credits will be reserved on a first-come, first-serve basis until the $1.5 million cap is reached each year.

Taxpayers must apply for the solar energy tax credit online.

Once the tax credit is verified, the Iowa Department of Revenue will send a letter to the taxpayer verifying the amount of the tax credit and provide a certificate number. Taxpayers can then claim the credit on an Iowa tax return by including the certificate number on form IA 148, Tax Credit Schedule.