Solar Energy System Tax Credits

**Residential applications are due by June 30, 2022, for residential installations completed during the 2021 calendar year. All other applications are due May 1 for installations completed by December 31 of the previous year.**

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Important Update on the Solar Energy System Tax Credit

Legislation (Senate File 2367, Division X) signed by Governor Reynolds on June 17, 2022, modifies the Iowa Solar Energy System Tax Credit for residential installations completed prior to the 2022 calendar year. This legislation does two things:

  1. The legislation allows 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 begun the process of contacting affected applicants and will place these applications back under review. Each application will be reviewed in full to determine whether it qualifies for an Iowa Solar Energy System Tax Credit award. If your application was previously denied because it expired under Iowa law, you do not need to reapply. Reapplying may cause additional delays in the review of your application. If additional information is needed, you will be contacted by the Department. If your application is approved, you will receive a tax credit certificate that may be claimed on your 2022 Iowa income tax return (i.e. the return that will be filed in 2023).
  2. The legislation re-opens and extends the application deadline for residential installations completed during the 2021 calendar year. Taxpayers who completed a residential solar installation during the 2021 calendar year who have not yet applied for the Iowa Solar Energy System Tax Credit must submit an application by June 30, 2022, in order to have their application considered. Applications must be submitted online within the Tax Credit Award, Claim & Transfer Administration System (CACTAS). Instructions are available below. The Department will review valid and timely applications in the order they are received. The Department may contact you for additional information. If your application is approved, you will receive a tax credit certificate that may be claimed on your 2022 Iowa income tax return (i.e. the return that will be filed in 2023).

Residential Solar Energy System Tax Credit applications described above are 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. However, for residential solar energy systems installed during the 2021 calendar year, the application must be received by June 30, 2022. 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 within the Tax Credit Award, Claim & Transfer Administration System (CACTAS). The system is designed so that once you have submitted an application, you can later sign into the system to track its status. The electronic process will create efficiencies in the review and approval of the hundreds of applications received for the Solar Energy System Tax Credit each year. All applications must be entered into CACTAS; paper applications are no longer available.

    To learn about the amount of tax credits awarded under the program cap, select the Solar Energy System Tax Credit drop down option from the home page. you do not need to sign into CACTAS.

    To apply for the tax credit, click “Sign In” at the top right corner of the screen. You will then need to sign in using the Authorization and Authentication (A&A) State system. If you do not have an A&A account associated with your email account, you will need to establish that account before signing into CACTAS. Once signed into CACTAS, select the View Details button under the description of the Solar Energy System Tax Credit discussion to start the application process. An installer may complete an application for you but the taxpayer requesting the credit is required to review and sign the Tax Credit Applicant Certification document available in the CACTAS application for download. Documents will also have to be uploaded as part of the application before it can be submitted.

  • 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. 

    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 701-42.48.

    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 “utility completion sheet” that you obtain from your utility company.
    • If you are a business applicant, 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.