Iowa solar rebates and incentives: 2024 guide

Iowa’s solar incentives are small in number but mighty in their impact. Between the federal tax credit and Iowa’s consumer-friendly solar buyback policy, you can save thousands on the cost of solar panels, and earn a speedy return on investment.

Although there are no state-specific solar incentives in Iowa, you can still benefit from the federal solar tax credit, which reduces the cost of installing your solar energy system by 30%.

Residential Clean Energy Credit

The Residential Clean Energy Credit, formerly known as the federal investment tax credit (ITC), can reduce your solar panel system's cost by 30%. Your entire system qualifies for this incentive, including equipment, labor, permitting, and sales tax. 

When you file your federal income taxes, you can claim this incentive as a credit towards your federal tax bill. Just keep in mind that to qualify for the ITC, you need to purchase your system either with cash or a solar loan–if you lease your system, you won't be eligible. 

You also need a high enough tax bill, though you can roll over any remaining credit year-to-year until 2035 when the ITC expires. The only time you might be eligible for a direct payment for the ITC is if you're a tax-exempt entity, like a nonprofit organization.

Iowa offers a sales tax exemption for solar equipment—that’s 6% savings on the cost of materials. Keep in mind that energy storage equipment such as batteries are excluded from this financial incentive, as is the cost of labor. 

Iowans also get a break on their property taxes. Installing solar panels increases the value of your home, which means that your property taxes increase too. But in Iowa you don’t have to pay taxes on the higher value of your home for the first five years after you go solar. 

Iowa previously offered residents a state-specific Solar Energy System Tax Credit, but it expired at the end of 2021.

If you connect your solar panel system to the grid, the largest Iowa utilities offer solar buyback programs.

Alliant Energy (aka Interstate Power and Light) offers an excellent buyback program known as  net metering. The company works like a bank for your solar power. If your solar panels produce more electricity than your home needs at a given time, your system will send the excess power to the grid, and IPL gives you an energy credit. When the sun isn't shining and you need to pull electricity from the grid, the utility draws against those credits. 

Depending on the weather, your energy use, and your solar setup, net metering makes it so you will owe very little, or even nothing, on your electric bill with solar panels. If you have excess credits at the end of a monthly billing cycle, they’re carried forward to the next month, in perpetuity, with no financial penalty. This is really the ultimate solar incentive, and greatly speeds up your payback period.

MidAtlantic Energy calculates their buybacks differently, but it’s still a great deal for solar customers. Instead of awarding energy credits for each kWh of excess solar—instead, they offer dollar-based bill credits. 

In practical terms, this isn’t a very important distinction for any MidAtlantic customers planning to go solar in the next year or two—you will (most likely) be grandfathered into this consumer-friendly rate plan for some time. But in 2027, the policy will be revised and may become much more akin to net billing, which devalues rooftop solar power significantly. 

The rest of the state’s electric cooperatives and municipal utilities aren’t required to provide a net metering option to residents, although many do.

Iowa doesn't offer any state-specific battery incentives. However, all batteries above 3 kWh in size are eligible for the 30% federal tax credit. 

In Iowa, solar batteries don’t make a ton of financial sense because the solar buyback programs are so consumer friendly. However, you can use your solar battery to store excess electricity generated by your solar panels, which gives you power to rely on during power outages or blackouts whenever your solar energy system is automatically shut off by your utility company for safety reasons.