Solar Energy Investment Tax Credit (Updated 2025)
Essential Info for Iowa Homeowners
How to take advantage of federal tax incentives
Homeowners considering solar energy can benefit from the Solar Energy Investment Tax Credit (ITC)—a key federal incentive that helps reduce the cost of solar panel installation. Understanding how this tax credit works can aid in making an informed decision about investing in solar energy.
Overview of the Solar Investment Tax Credit
As of 2025, the solar energy investment tax credit (ITC) provides homeowners with a 30% tax credit for installing eligible solar energy systems. For example, a solar system costing $20,000 qualifies for a $6,000 tax credit, directly reducing the amount of federal taxes you owe. This incentive supports the transition to renewable energy, making it a cost-effective choice for homeowners.
The tax credit applies to the entire solar project, including:
Solar Panels and Battery: Costs for photovoltaic (PV) panels, batteries, inverters, wiring, and other necessary materials.
Labor Costs: Expenses associated with site preparation, assembly, and initial installation, including permitting and interconnection fees.
This credit is nonrefundable, meaning it can reduce tax liability but will not result in a refund. However, any unused portion can be carried forward to future tax years.
The 30% credit rate is set to remain in effect through 2032. After that, it will decrease to 26% for systems installed in 2033 and 22% for those installed in 2034. Unless renewed by Congress, the credit will expire in 2035.
Eligibility for the ITC
To qualify for the ITC solar program, homeowners must meet the following criteria:
Own the solar system (purchased outright or financed; leased systems do not qualify)
Install the system on a U.S. residence (primary or secondary homes qualify)
Have sufficient tax liability to utilize the credit
There is also a commercial solar ITC for businesses, but we’ll focus on residential installations here.
Claiming the ITC on Taxes
Homeowners can claim the ITC tax credit for solar power by following these steps:
Retain all purchase and installation receipts.
File IRS Form 5695 when submitting a tax return.
Report the credit amount on a 1040 tax return to lower tax liability.
If the full credit cannot be used in a single year, the remaining amount can be rolled over to future tax years.
State Solar Incentives in Iowa
While the federal ITC solar tax credit is the primary incentive, additional local benefits may be available. Although Iowa’s state solar tax credit expired in 2021, some homeowners may still qualify for rebates, net metering, or property tax exemptions through utility companies.
For instance:
Alliant Energy & MidAmerican Energy offer net metering, allowing homeowners to receive credit for surplus energy fed back into the grid.
Some municipalities or counties may offer incentives—a qualified solar installer will help you navigate any of these.
Stacking the ITC with Other Benefits
The ITC credit solar can be combined with additional incentives, such as:
State or local rebates (when available)
Utility company programs
USDA grants (for rural homeowners and businesses)
Homeowners financing solar installations through loans may also qualify for energy-efficient mortgage programs.
Is Now a Good Time to Invest in Solar?
Several factors make solar energy a valuable investment for Iowa homeowners:
The 30% ITC solar credit is only available until 2032.
Solar panel costs have significantly declined over the last decade.
Electricity rates continue to rise, making solar a strategic long-term investment.
Studies indicate homes with solar panels sell for more than those without.
Stateside Solar Energy: A Trusted Solar Partner
Stateside Solar Energy specializes in providing high-quality solar installations tailored to individual homeowner needs. While not tax professionals, the team is knowledgeable in solar installation processes and can help homeowners maximize their benefits.
Why Work with Stateside Solar Energy?
Expertise: Extensive industry experience ensures high-quality installations.
Personalized Service: Custom solutions designed to meet energy goals and budgets.
Quality Products: Use of certified, reliable solar equipment.
Comprehensive Support: Assistance from consultation through post-installation.
Next Steps
Homeowners considering solar should act while the 30% solar investment tax credit is in effect. Investing in solar energy helps mitigate future electricity rate increases and provides immediate savings on utility bills.
For a consultation, contact Stateside Solar Energy today. The team is ready to assist in transitioning to renewable energy and maximizing available incentives.
Disclaimer: This information is for educational purposes. Tax laws are subject to change, and homeowners should consult a qualified tax professional for personalized guidance on the solar investment tax credit and its application to individual circumstances.
