The Residential Solar Federal Income Tax Credit

Iowa residents have access to the Federal Investment Tax Credit (ITC). Other types of renewable energy (i.e. geothermal, etc.) are also eligible for the credit. In addition, their will be solar rebates in the future.

What is a tax credit?
A tax credit is a dollar-for-dollar reduction in the amount of income tax you owe. For example, claiming a $1,000 federal tax credit reduces the amount of federal income tax you owe by $1,000. So, if your $2,500, the tax credit of $1,000 reduces the amount of tax due to $1,500. Your tax preparer will include the credit in your tax statement.


What is the federal solar tax credit?
The ITC is currently 30%. The credit is computed as a percentage of the cost of the solar system. For example, if the solar system costs $20,000, the tax credit is $6,000 ($20,000 X 30% = $6.000). If the credit is larger than the amount of federal tax you owe, the unused portion can be carried forward to subsequent years. There is no limit to the number of years the unused credits can be carried forward. Also, there is no limit to the size of the solar system the tax credit can be applied against.


The credit is 30% through 2032. At that time the credit is reduced and eliminated in 2035.

  • 2022 – 2032 = 30%
  • 2033               = 26%
  • 2034               = 22%
  • 2035              The ITC disappears for residential systems

Are you eligible to claim the federal solar tax credit?
You are eligible if you own the solar system (i.e. you purchased it with cash or with financing) and are neither leasing the system nor paying a solar company for electricity generated by the system. Installation of the system must be completed during the tax year. The credit can only be claimed on the “original installation” of the solar equipment. If you buy an existing solar system, you cannot claim the credit.

If you prefer, you can opt to receive the credit as a direct cash payment.

What expenses are included?
Solar panels, inverters, mounting equipment, wiring, other equipment. Contractor labor costs for onsite preparation, assembly, and original installation, including permitting fees, inspection costs, and developer fees.

Source: Homeowner’s Guide to the Federal Tax Credit for Solar Photovoltaics | Department of Energy

Scroll to Top