Iowa Geothermal Credits
Iowa residents can now apply for the new Iowa Geothermal Heat Pump tax credit approved by the 2019 Legislature. This new program replaces the previous program that ended December 31, 2018. The Iowa Geothermal Association along with other industry organizations worked diligently to inform legislators about the importance of the Iowa Geothermal Tax Credit and to get it reinstated.
The Iowa Geothermal Tax Credit is:
- Effectively a 6 percent credit (based on a formula of 20% of the federal residential energy efficient property tax credit which is currently 30%).
- For geothermal heat pump units installed on or after January 1, 2019.
- Available for installations to Iowa residential properties to the resident of the home.
The process to receive the tax credit for installations starting in 2019 differs from those for pre-2019 installations.
- Before claiming the tax credit for tax year 2019 or later, taxpayers must apply and receive approval for the credit with the Iowa Department of Revenue. Claims made on the Iowa 1040 without such award will be denied.
- Application DEADLINE for 2019 installations is May 1, 2020.
- The credit is awarded on a first-come first-served basis.
- The total awards are capped at $1 million annually and a waitlist will be established when the annual cap is reached.
- Application approvals are contingent upon the availability of tax credits for any particular year.
How to Apply
Apply for the Iowa Geothermal Heat Pump Tax Credit through the Iowa Department of Revenue website at https://tax.iowa.gov/heat-pump-tax-credit. Search “geothermal” to reach application instructions, documentation requirements, and forms.
The Iowa Geothermal Association (IGA) does not provide legal, tax or accounting advice; the information provided is intended to be general in nature; and visitors to the IGA website should consult their own professional tax, accounting and legal advisors on individual tax matters.
The Federal Geothermal Credit
In February 2018, the 30% geothermal federal tax credit was reinstated through 2019 and can be retroactively applied to installations “placed in service” on January 1, 2017 or later. Property is usually considered to be placed in service when installation is complete and equipment is ready for use. However, if the system is part of the construction or renovation of a house, it’s considered placed in service when the taxpayer takes residence in the house. To save the most on your installation, you’ll want to act quickly—this credit is set to decrease each year through 2021 with the amount dropping to 26% in 2020 and 22% in 2021.
- 30% of total system cost through 2019
- 26% of total system cost in 2020
- 22% of total system cost in 2021
- No limit to credit amount
- Can be used to offset AMT tax
- Can be used in more than one year
- Can be combined with solar and wind tax credits
- Can be combined with energy efficiency upgrade credits
Following the links below will take you to a comprehensive sources of information on state, local and federal incentives that promote energy efficiency. Please be aware that your eligibility for an incentive will depend upon meeting specific criteria and you may need to consult with your tax preparer.
** Iowa utilities may have incentives on their web sites.
The following link to a U.S. Department of Energy website also provides a useful resource that is a good companion to the links on this page. All offer information for the states on energy tax credits, rebates and savings but information filters provided at http://energy.gov/savings make it easy to sort by type. Just select “Geothermal Heat Pumps” for any state, or select “All” for a listing of every state that has some sort of financial assistance for geothermal heat pump installations.