Last updated: July 2025
Written by
Jamie Smith
Homeowners in Iowa who buy solar panels can save about $7,830 on their installation through solar incentives and the investment tax credit (ITC). Incentives make it easier on your wallet to go solar – and the electricity bill savings seen each month are an added bonus.
If you’re a resident of the Hawkeye State and you’ve considered going solar, there are a few ways you can save some money on your installation, all while soaking in the benefits of renewable energy.
Incentive | Estimated average annual savings | Eligibility | About |
|---|---|---|---|
Federal solar tax credit | $7,830 | All tax-paying U.S. citizens | Tax credit equal to 30% of installation costs, applied to federal income taxes |
Iowa property tax exemption | $207, varies with value of system and property | All tax-paying Iowa residents | Residents who install solar are 100% exempt from paying additional property taxes for 5 years |
Iowa sales tax exemption exemption | $1,320, varies with value of system | All tax-paying Iowa residents | Residents who install solar are 100% exempt from paying sales tax on their purchase |
Quick Facts:
Value: 30% of solar installation costs
Frequency: One-time tax credit, rollover for five years
How to apply: File IRS Form 5695 with annual tax return
The federal solar tax credit is the most significant nationwide incentive for homeowners to invest in clean energy projects. Homeowners who purchase solar energy systems can save 30% of the total installation cost through their income taxes.
Iowans save an average of $7,830 on solar installations with the tax credit. Remember, the federal tax credit is not an upfront incentive payment — you'll see the savings when you file your taxes for the year.
If your tax liability is less than the value of the federal investment tax credit, it will be reduced to $0, and any remaining credit will apply to next year's taxes. The credit can roll over for five years, and there is no income limit for the solar tax credit.
Quick Facts:
Value: 100% property tax exemption
Frequency: Annually for up to 5 years
How to apply: There is no formal application
A great benefit to installing solar panels is that they can raise the value of your home! In fact, a study conducted by SolarReviews experts found that the average home with solar panels sells for 6.9% more than homes without!
However, with raised property value comes higher property taxes. Thankfully, Iowa offers a property tax exemption that prevents this. The average property tax rate in the Hawkeye State is 1.5% of their property value, meaning solar homeowners will save roughly $207 on average from the exemption.
Quick Facts:
Value: 100% sales tax exemption
Frequency: Once at the time of purchase
How to apply: There is no formal application
Iowa is one of the many states where homeowners are exempt from paying sales tax when they purchase a solar energy system. The sales tax in Iowa is currently 6%.
Iowa's average solar panel system costs $22,000, meaning sales tax would add about $1,320! Thankfully, Iowa homeowners don't have to worry about this added cost.
Are solar incentives in Iowa going away? Are solar incentives in Iowa going away? Iowa's net metering policy is set to be revised in 2027. Experts speculate it will be replaced with an alternative solar buyback program that could lead to lower electricity bill savings. The Trump administration may also repeal the Inflation Reduction Act (IRA), potentially abolishing the federal tax credit, but plans surrounding that are unclear. It's best to go solar sooner rather than later to take advantage of current Iowa solar incentives.
Quick Facts:
The average cost of electricity in Iowa is $0.15 per kWh
Iowa offers net metering at the full retail price for those serviced by the investor-owned utilities: MidAmerican Energy or Alliant Energy
Customers serviced by municipal or cooperative electric utilities are not covered under the state’s net metering policy
Iowa has a solid net metering policy. Customers of investor-owned utilities, MidAmerican Energy and Alliant Energy, can sell excess energy their panels produce back to the grid at the full retail rate.
One main difference in policy between the two utilities is that net metering credits for MidAmerican customers expire if they are not used, but Alliant Energy customers can bank unused credits and cash out annually.
Iowa’s net metering policy does not apply to those serviced by municipal or cooperative utility companies. These companies can still offer net metering to customers but aren’t mandated to do so.
The average solar panel installation in Iowa will cost about $2.53 per watt, which is a pretty great price when compared to the current national average installation cost of $3.00 per watt. Based on the average 8.7 kilowatt (kW) system size in Iowa, you can expect to pay an upfront cost of $22.011.
After applying the solar investment tax credit, the total cost will be $15,407, not including the savings customers see from net metering.
Federal tax credit: $22,011 x 30% = $6,603
Total savings: $6,603
Effective system cost: $22,011 - $6,603 = $15,407
With a combination of the federal tax credit, tax exemptions, and a solid net metering policy, solar can be a worthwhile investment for homeowners in Iowa. However, Iowa's low electricity prices and lack of upfront rebates mean savings won't be as significant here compared to other states.
Through bill savings, the average payback period in Iowa is about 13 years – which means around 12 years of free electricity! But everyone's situation is unique. The best way to determine if solar is worth it for your specific home is to speak to local solar companies. Installers can help you design a solar project that caters to your energy needs and guide you through the solar incentive application process.
We recommend getting at least three quotes from reputable solar installers to ensure you get the best deal on solar panels in Iowa. SolarReviews can connect with pre-vetted solar installers in Iowa, or you can research our extensive directory of solar companies in Iowa.