Hi there! Are you an Iowa homeowner considering going solar, but not sure where to start? If so, you‘ve come to the right place. Making the switch to solar can save typical households here thousands of dollars in the long run.
But to maximize your savings, it helps to understand the variety of rebates, tax credits, and other solar incentives available in our state.
In this detailed guide, I’ll break down the economics of solar for Iowans in 2023 and how much you can expect to save based on the latest policies, regulations, and solar panel pricing.
Overview – Solar Energy Landscape in Iowa
First, let‘s set the stage on where Iowa stands today for solar adoption. Of the over 7,000 MW of total renewable generation capacity in the state, wind energy makes up the vast majority. Iowa actually leads the whole country for wind power as a share of total electricity produced!
However, out of those 7,000+ MW renewable MW online today, solar energy only accounts for around 105 MW currently. So less than 2% of Iowa‘s renewable portfolio.
Electricity prices here also remain below average compared to nearby states like Illinois or Wisconsin. So those factors result in longer payback times for solar panel systems installed on Iowa homes.
But even with lagging solar development and cheap utility rates, the economics can still make sense by tapping into incentives.
As you‘ll see, federal tax credits, state rebates, net metering payouts, and exemptions combine to help accelerate solar payback timelines for Iowa households.
Ways Iowans Save Money By Going Solar
Iowa residents considering solar have three main avenues to reduce system costs:
Federal solar incentives – Primarily the federal Investment Tax Credit (ITC)
State and local solar incentives – Tax rebates, net metering payouts, etc.
Solar-friendly regulations – Rules benefiting system owners
Let‘s cover each area in more detail…
Federal Solar Panel Tax Credits
The biggest opportunity to save on solar panels comes via federal solar tax incentives. Most notably, the federal Investment Tax Credit or ITC.
The ITC offers homeowners a dollar-for-dollar reduction in their federal income tax obligation based on 30% of their full solar installation price (as of 2023 and for years to come).
So if you install a $15,000 solar system, applying the 30% ITC saves you $4,500 off your federal taxes owed! Not many investments return 30%+ right off the bat.
Now this does depend on having at least $4,500 in federal tax liability though. Otherwise if you owed say only $2,000 overall, your credit would max out at that $2k amount.
But it still represents a nice chunk of guaranteed savings that incrementally steps down over the next decade:
| Year | Tax Credit Amount |
|---|---|
| 2023 thru 2032 | 30% credit |
| 2033 | 26% credit |
| 2034 | 22% credit |
After 2034 however, the ITC is set to expire unless new legislation extends it out further. So over this next critical decade, Iowa solar shoppers can maximize the savings.
To give you a sense based on average solar system sizes:
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5 kW system at $3.00/W = $15,000
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30% of $15k = $4,500 potential ITC savings
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10 kW system at $2.50/W = $25,000
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30% of $25k = $7,500 potential ITC savings
So for a typical home solar installation, you‘d save between $4,500 up to $7,500 off your federal tax bill over the next 11 years.
The only catches are:
- You must own the solar array (no leasing)
- It must be for your primary residence
- New equipment only
But besides that, all Iowa homeowners installing solar systems can tap into the 30% federal solar credit.
The next question becomes – are there additional Iowa state incentives you can "double dip" on?
State Tax Credits and Solar Incentives
In addition to federal solar tax relief, some states add their own credits and rebates through:
- State tax credits – % based off federal ITC amount
- Renewable energy rebates – Upfront or performance-based
- Net metering – Bill crediting for excess solar electricity
- Property tax exemptions – No higher property taxes for solar
- Sales tax waivers – No state sales tax on equipment
So what‘s offered specifically to Iowans?
While not as robust as other top solar states, Iowa still has a few helpful incentives.
Iowa Solar Tax Credit
Iowa offers a state tax credit equal to 50% of the federal ITC amount.
So combined with the 30% federal credit, Iowa solar customers can save up to 80% off their IRS + state tax obligations from installing solar panels if timed properly during highest tax years.
For a $15k system, that‘s:
- Federal ITC: $4,500
- Iowa tax credit: $2,250
- Total credits: $6,750
Other Iowa-specific solar incentives include:
- Net metering – Mandatory for large utilities to credit excess solar generation, but no payout for leftover credits. They roll over indefinitely month-to-month.
- 100% sales tax exemption – No state/local sales tax owed on solar equipment purchases. Saves you ~6-7% off system costs.
- No property tax hikes – Adding solar won‘t trigger higher property taxes like other home improvements might in Iowa.
So while upfront rebates are lacking at the moment, tax credits and net metering help accelerate payoff timelines in the state.
Should Iowans Lease Solar Panels?
Since Iowa doesn‘t allow third-party ownership of solar, leasing is prohibited for residents here. You must own systems outright installed on Iowa properties.
And with strong tax incentives in place, purchasing ends up being the best financial scenario anyway.
Solar leases can make sense in states lacking incentives. But the long-term savings in Iowa are minimized without tapping into credits. And there are plenty of low-cost loan options too.
So for Iowans, direct ownership is the way to go over leasing. You‘ll maximize savings over time by owning panels yourself.
Iowa Solar Incentives Summary
Here‘s a quick rundown of federal and state solar incentives available to Iowa homeowners:
| Incentive | Savings Amount | Details |
|---|---|---|
| Federal Tax Credit | 30% credit | Until 2032 then steps down |
| Iowa Tax Credit | 50% of federal credit | Based off federal ITC amount |
| Net Metering | Retail rate credits | Rollover monthly but no payout |
| Sales Tax Exemption | ~6-7% | Waived sales tax on equipment |
| Property Tax Exemption | Varies | Solar won‘t trigger higher property taxes |
Additional Solar Analysis and Iowa Reads
I hope this overview gives you a better sense of the economics around installing solar panels on your Iowa home.
You can save thousands both upfront and over the long haul by tapping into federal and state tax credits, net metering bill savings, and exemptions.
To go deeper on Iowa clean energy, check out these related articles:
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Illinois Solar Incentives – IL has some of the best solar policies, but also very high electricity prices. Compare incentives between these neighboring states.
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Owning an Electric Vehicle in Iowa – With average electric rates around 9.5¢/kWh, Iowa EV drivers can charge at home for only ~$700 a year!
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Best Des Moines Internet Providers – Who offers fast, reliable internet services in Iowa‘s capital city? Cable vs fiber optic comparisons.
I hope this guide serves you well on your solar research journey! Feel free to reach out with any other questions.