Last updated: December2024
Written by
Ben Zientara
Homeowners in Iowa who buy solar panels can save about $7,830 on their installation through solar incentives and the investment tax credit (ITC). This doesn’t even include the savings that solar owners see in their electricity bills each month.
If you’re a resident of the Hawkeye State and you’ve considered going solar – there are a few ways you can save some money on your installation, all while soaking in the benefits of renewable energy.
Incentive | Estimated average annual savings | Eligibility | About |
|---|---|---|---|
Federal solar tax credit | $7,830 | All tax-paying U.S. citizens | Tax credit equal to 30% of installation costs, applied to federal income taxes |
Iowa property tax exemption | $207, varies with value of system and property | All tax-paying Iowa residents | Residents who install solar are 100% exempt from paying additional property taxes for 5 years |
Iowa sales tax exemption exemption | $1,320, varies with value of system | All tax-paying Iowa residents | Residents who install solar are 100% exempt from paying sales tax on their purchase |
Quick Facts:
Value: 30% of solar installation costs
Frequency: One-time tax credit, rollover for five years
How to apply: File IRS Form 5695 with annual tax return
The federal solar tax credit is the most significant nationwide incentive for homeowners to invest in clean energy projects. Homeowners who purchase solar energy systems can save 30% of the total installation cost by reducing their income taxes.
In Iowa’s case, the average solar system will earn a tax credit of $7,830. It’s important to note that this is not an upfront payment, but it still lowers the cost of solar panels. The federal tax credit reduces your income tax liability, and you won’t see the benefits of the tax credit until you file your taxes for the year.
If your liability is less than the value of the federal investment tax credit, it will be reduced to $0, and the remaining credit will be applied to next year’s taxes. The credit can roll over for five years without an income limit.
Quick Facts:
Value: 100% sales tax exemption
Frequency: Once at the time of purchase
How to apply: There is no formal application
Iowa is one of many states where homeowners are exempt from paying a sales tax when they purchase a solar energy system. The sales tax in Iowa is currently 6%.
If the average solar panel system in Iowa costs $26,100, the tax would tack on over $1,500 more! Thankfully, Iowa homeowners don’t have to worry about this added cost.
Quick Facts:
Value: 100% property tax exemption
Frequency: Annually for up to 5 years
How to apply: There is no formal application
A great benefit to buying solar power is that it can raise the value of your home! In fact, a study conducted by SolarReviews experts found that the average solar home sells for 6.8% more than homes without it!
With raised property value comes higher property taxes. However, Iowa offers a property tax exemption for homes with solar panels. Iowans' average property tax rate is 1.5% of their home’s value, meaning solar homeowners will save roughly $207 on average from the exemption.
Quick Facts:
The average cost of electricity in Iowa is $0.14 per kWh
Iowa offers net metering at the full retail price for those serviced by the investor-owned utilities: MidAmerican Energy or Alliant Energy
Customers serviced by municipal or cooperative electric utilities are not covered under the state’s net metering policy
Iowa has a solid net metering policy and was actually one of the earlier states to adopt it. Customers of investor-owned utilities, MidAmerican Energy and Alliant Energy, can sell any excess energy their solar panels produce at the full retail rate.
The main policy difference between the two utilities is that net metering credits for MidAmerican customers expire if they are not used, but unused credits for Alliant Energy customers are banked each month and can be cashed out annually.
It’s important to note that the net metering policy in Iowa does not apply to any municipal or cooperative utility companies. These companies can still offer net metering to customers but aren’t mandated to do so.
The average solar panel installation in Iowa will cost about $2.53 per watt, which is a pretty great price when compared to the current national average solar panel cost of $3.00 per watt. Based on the average 8.7 kilowatt (kW) system size in Iowa, you can expect to pay an upfront cost of $22,011.
After applying the solar investment tax credit, the total cost will be $15,407, not including the savings customers see from net metering.
Federal tax credit: $22,011 x 30% = $6,603
Total savings: $6,603
Effective system cost: $22,011 - $6,603 = $15,407
How do solar incentives and rebates work together? The solar incentives available in Iowa will not affect one another. The tax exemptions are more of an avoided cost for your system, while the federal solar tax credit is based on the system’s total cost. Iowa doesn’t offer any upfront solar rebates, so you won’t have to worry about any technicalities.
With a combination of the federal tax credit, tax exemptions, and solid net metering policy, solar can be worth it for homeowners in Iowa. However, with Iowa’s low electricity prices and lack of rebates, savings won’t be as significant here compared to other states with better solar initiatives.
Through bill savings, the average payback period in Iowa is about 13 years – which means 12 years of free electricity! But everyone’s situation is unique. The best way to determine if solar is worth it is to talk to local solar companies. Installers can help you design a solar project that fits your energy needs and can guide you through the solar incentive application process.
We recommend getting at least three quotes from reputable solar installers to maximize your savings and get the best deal on solar panels in Iowa. SolarReviews can connect you with pre-vetted solar installers in Iowa, or you can research our extensive directory of solar companies in Iowa.
Ben Zientara is a writer, researcher, and solar policy analyst who has written about the residential solar industry, the electric grid, and state utility policy since 2013.
His early work included leading the team that produced the annual State Solar Power Rankings Report for the Solar Power Rocks website from 2015 to 2020. The rankings w...
Learn more about Ben Zientara