The Bipartisan Budget Act of 2018, signed in February 2018, reinstated the tax credit for fuel cells, small wind, and geothermal heat pumps. The tax credit for all technologies now features a gradual step down in the credit value.
A taxpayer may claim a credit of 30% of qualified expenditures for a system that serves a dwelling unit located in the United States that is owned and used as a residence by the taxpayer. Expenditures with respect to the equipment are treated as made when the installation is completed. If the installation is at a new home, the "placed in service" date is the date of occupancy by the homeowner. Expenditures include labor costs for on-site preparation, assembly or original system installation, and for piping or wiring to interconnect a system to the home. If the federal tax credit exceeds tax liability, the excess amount may be carried forward to the succeeding taxable year. The maximum allowable credit, equipment requirements and other details vary by technology, as outlined below.
GEOTHERMAL FEDERAL TAX CREDIT
There is no limit on the dollar amount of this credit. The home served by the system does not have to be the taxpayer’s principal residence. Systems must be placed in service on or after January 1, 2008, and on or before December 31, 2021. The geothermal heat pump must meet federal Energy Star criteria.
SOLAR FEDERAL TAX CREDIT
There is no limit on the dollar amount of this credit. The home served by the system does not have to be the taxpayer’s principal residence. Systems must be placed in service on or after January 1, 2006, and on or before December 31, 2021.
GEOTHERMAL IOWA STATE TAX CREDIT
The credit will be available to consumers on a first-come, first-served basis with a cap on total funds available of $1million annually. There will be a wait list if the funds are depleted for the year. Applicants on a waitlist will be first in line for the next year. We expect more information from Revenue as questions come up.
As of today, taxpayers can apply for the credit for those taxpayers who have a geothermal heat pump installed on their residence on or after January 1, 2019. The deadline to submit an application is May 1 of the following year of installation. The Credit is equal to 20% of the federal residential energy efficient property tax credit allowed for geothermal heat pumps provided in section 25D(a)(5) of the Internal Revenue Code.
SOLAR IOWA STATE TAX CREDIT
The credits awarded per calendar year is capped at $5 million and reserved on a first-come, first-served basis until the cap is reached each year. The Department will establish a wait list for the next year's allocation of awards if that cap is exceeded. The application for the Iowa credit cannot be made for individuals until the installation of the solar energy system is complete. Installations that occur after January 1, 2016 are equal to 50% of the federal credit up to $5,000.
No Property taxes on Geothermal Systems installed after 2012 for 10 years!*
No Property taxes on Solar PV Systems installed after 1978 for 5 years!*
* Iowa Taxes ONLY
E&J Geothermal knows how much of an investment a new heating, air conditioning, air quality or geothermal system can be. That's why we want to help you protect your investment!
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* All rebates are subject to change