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Solar Energy System Tax Credit

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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. The Department continues to review 2020 and 2021 applications. Once your application is reviewed, it will either be denied or updated to waitlisted status. 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.

2020 award year: The 2020 award cap has been met and the Department has issued all available 2020 tax credit awards.

2021 award year: The Department estimates that valid and complete business or residential applications with a submission date before October 1, 2020, will be eligible to receive a tax credit award and certificate during the 2021 award year. The Department is in the process of issuing tax credit certificates for the 2021 award year.

2022 award year (business installations): The Department estimates that for business installation applications with a submission date of October 1, 2020, or later, the earliest a taxpayer may receive a tax credit award and certificate is during the 2022 award year. Tax credit certificates for the 2022 award year related to business installations will not be issued until after May 1, 2022.

2022 award year (residential installations): The Department estimates that for residential installation applications with a submission date of October 1, 2020, or later, the application and tax credit request will expire under Iowa law and the taxpayer will not receive an Iowa Solar Energy System Tax Credit.

The October 1, 2020, submission date cut off for 2021 and 2022 awards is an estimate and may change. If you complete a solar installation in 2021 you must file your application by the May 1, 2022 deadline to have a timely request. You are strongly encouraged to submit your application by the deadline even if you expect your request to expire as described above.

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, is 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. Any residential tax credit request that does not receive a tax credit award during the 2021 award year shall expire under Iowa law and shall not carry forward on the waitlist to future years. Submitting an application before the residential tax credit expires at the end of 2021 is no guarantee a taxpayer will receive an award, as described above.

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.


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%

Solar Energy System Tax Credits by Year (includes amounts awarded and amounts claimed on waitlisted applications).

2022
$0
2021
$4,901,273*
2020
$4,974,580

*The Department has received a high volume of Solar Energy System Tax Credit applications. The Department has already awarded and issued the 2020 awards. If your application has not been awarded, your application will be considered for an award in 2021 or later. Tax credit awards for the 2021 award year will first be issued after May 1, 2021. Once the 2021 cap is reached, the remaining applications will be placed on the 2022 award waitlist or will expire (see above).

The credits will be issued on a first-come, first-served basis until the $5 million cap is reached each year. If the Department receives applications for tax credit awards in excess of the $5 million available in a year, the applications will be prioritized based on the date and time a completed application is successfully submitted. To complete an application you must have electronic copies of the following required documents:

  • An invoice or other document showing the cost of the system
  • 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.
  • A copy of the “utility completion sheet” that you obtain from your utility company
  • Documentation that you meet the separate and distinct rules if you have installed more than one system at the same location or address and have claimed or are claiming a credit for each installation
  • The Tax Credit Applicant Certification form that you will complete during the application process
  • The Department may also request any documentation necessary to verify you meet the requirements for the type of application you have submitted.
If you are applying for the credit for a business installation, the application will also request the beginning construction date and documentation to verify the date the system was placed in service. The documentation includes approval of required license or permits, or a letter from the utility company that you are connected to the power grid. Alternatively, if you are unable to obtain a document from the utility company you must also attach a statement that includes the following information:

  • Your name, address, taxpayer identification number, email address, and telephone number
  • The date that the energy property was placed in service
  • A declaration, applicable to the statement and any accompanying documents, signed by you, or signed by a person currently authorized to bind you in such matters, in the following form: “I, the undersigned, declare under penalties of perjury or false certificate, that I have examined this and accompanying documents, and, to the best of my knowledge and belief, it is true, correct, and complete.”

Although you have the option to save a partially completed application and return to finish it later, a saved application is NOT considered submitted. Failure to submit the application by May 1 following the installation year will result in a denial of the application. However, submission of a completed application at any time before the due date does not guarantee that you will be awarded a Solar Energy System Tax Credit.

If your application is approved, a tax credit certificate will be mailed to you.

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