Solar Energy System Tax Credits

**Applications are due May 1 for installations completed by December 31 the previous year**

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Important Update on the Solar Energy System Tax Credit

The Iowa Solar Energy System Tax Credit expires and is unavailable under Iowa law for residential installations completed after December 31, 2021. Therefore, any residential tax credit request that does not receive a tax credit award during the 2021 award year will expire under Iowa law and will not carry forward on the waitlist to future years. This result is required under Iowa Code section 422.11L and the version of the federal residential solar tax credit (Internal Revenue Code section 25D) to which Iowa is conformed. 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 below.

The Iowa solar energy system tax credit for business installations does not expire at the end of calendar year 2021, but Iowa law provides that it will only apply to installations that begin construction before calendar year 2022, so its availability will be limited in the future. Valid and timely business tax credit requests will not expire under Iowa law and may carry forward on the waitlist to future years.

On May 1, 2021, the Department of Revenue began the process of awarding Iowa solar energy system tax credits for the 2021 award year. The Department will issue tax credit award certificates to eligible applicants for the 2021 award year until the aggregate annual award limitation under Iowa law ($5 million) is met. The Department continues to receive and review applications for solar energy systems installed during 2021 and has a high volume of waitlisted applications from previous years. Tax credit applications are reviewed, waitlisted, and awarded in the order of the application’s submission date. Additional information about the 2021 award year and future award years is as follows:

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 these tax credit certificates.

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. You may check the status of your application, including your submission date, by signing into your account on the Credit Award, Claim, and Transfer Administration System (CACTAS). See below for more information about CACTAS.

  • 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. 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.

    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. 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.

    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.