Are you worried about the end of Iowa’s tax credit meaning you don’t have a way to save on home solar in Iowa? Well we have good news for you!
Homeowners in Iowa can go solar and still save with federal and state incentives that help make solar even more affordable. As the popularity of solar increases, and Iowa makes even more strides as the number one state for renewable energy, it makes the switch to solar a no-brainer.
Homeowners in Iowa have three different ways to save money when they make the switch to solar with the federal tax credit, saving on the sales tax of the cost of your system, and adding value to your home.
Here at Purelight Power we want to save our customers money from day one, and are dedicated to making the switch to solar affordable. In the next few paragraphs we’ll discuss the solar incentives homeowners in Iowa can take advantage of.
Incentives for Solar in Iowa
Before getting into the nitty gritty of everything, let’s clarify what the difference is between a tax incentive and other incentives that help you save.
The federal tax incentive is claimed on your income taxes the year your solar system was installed. While Iowa unfortunately doesn’t have a state-level tax rebate as of 2021, the state does have two automatic incentives (the sales and property tax exemptions) for solar.
Even more savings with solar are available with net metering through MidAmerican and Alliant Energy. Net metering allows you to use your excess power as credit for months your system isn’t able to produce as much.
The Solar Investment Tax Credit: Recoup 26% of Your Solar Costs
There’s a good reason to switch to solar sooner rather than later: residential solar installed before December 31st, 2022 can be claimed on your federal income taxes for a credit up to 26% worth the cost of your system.
Iowans who want to claim this credit need to have a new solar energy system being used for the first time installed at their primary or secondary residence.
Some other things to be aware of prior to claiming the Solar ITC:
- The credit can only be claimed on systems that are owned (financed systems count!), whereas leased systems cannot be claimed.
- You can’t claim the Solar ITC on residential properties rented to others unless you also live at the property at least half time. For example: you rent to your roommates who live in the same home as you, you can still claim your solar on your tax return.
- Even if how much you owe in taxes based on your income (known as your tax liability) is less than the credit amount you’d claim, that’s ok. The first year you claim the Solar ITC you simply wouldn’t owe any federal tax. The following year, carry the credit forward to reduce your tax liability by whatever amount is left on the credit.
For example, if you purchase or finance a solar energy system worth $28,000, you have a tax rebate of roughly $7,280. If your tax liability is $6,000 for 2022, you wouldn’t owe any federal taxes. In 2023 you’d have another $1,280 from the original credit to put towards lowering your tax liability.
Want to know more about claiming the Solar ITC on your federal income tax return? We have a blog with a more in-depth look.
Add Value to Your Home Without Raising Your Property Taxes
Adding something like a solar energy system to your property can add a lot of value to your home by thousands or even tens of thousands of dollars. Normally, this would raise your property taxes a lot as well.
However, in Iowa when you install your solar system all that added value to your house is exempted from being included in your property taxes for five full years! That should ease your mind and alleviate concerns about not seeing the full value of your investment.
Homeowners in the Hawkeye state are in for another treat too. With other home improvement purchases, there’s a big chunk of change that you’re usually responsible for paying: the 6% sales tax.
Your purchases made as part of your solar installation are exempt from being charged the sales tax. Think 6% isn’t a big deal? That could save you $1,560, if your system costs $26,000.
Save More by Switching to Solar Now!
Using the federal Solar Investment Tax Credit (ITC), net metering, and current exemptions for solar available in Iowa, you can save big with solar.
Make sure you’re getting the most out of your investment by working with your local and professional solar company in Iowa: Purelight Power. We make the switch to solar extra more affordable with our 0 out of pocket program. Don’t miss out on producing clean and renewable energy you own. Find out if your roof qualifies today!
Remember, after December of this year, that 26% drops to 22% for 2023, and then disappears.