Geothermal Heat Pump Tax Credit

In May 2012 Iowa enacted a series of tax incentives for residential geothermal incentives. Geothermal heat pumps installed on residential property in Iowa are eligible for a tax credit equal to 20% of the Federal Tax Credit. Because the federal tax credit is set at 30%, the state tax credit is equal to 6% of the system cost. Any credit over the tax payer's liability may be carried forward for up to 10 years. The credit may be applied retroactively to systems installed beginning January 1, 2012, and expires after December 31, 2016. The tax credit must be claimed using Form IA 148 and must be submitted with Federal Form 5695.

2019 Update: Taxpayers who have a geothermal heat pump installed on their residence on or after January 1, 2019, can now apply for the Geothermal Heat Pump Tax Credit with the Department of Revenue. The deadline to apply is May 1 following the year of installation. Taxpayers must first apply for a tax credit award with the Department before claiming a Geothermal Heat Pump Tax Credit for the tax year 2019 and later; claims made on the IA 1040 without an award will be denied.

The credit is only allowed on residential properties located in Iowa. To qualify for the Geothermal Heat Pump Tax Credit, the resident of the home where the heat pump is installed must be the applicant. 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.

Tax credits are awarded on a first-come, first-served basis. Completing the application does not guarantee that you will be awarded a Geothermal Heat Pump Tax Credit. Tax credit availability and application approvals are contingent upon the availability of the tax credits in that particular tax year. Once awarded Geothermal Heat Pump Tax Credits reach the maximum amount of tax credit awards ($1 million in 2019), the Department will establish a waitlist, also on a first-come, first-served basis. An application on the waitlist, as described above, shall not constitute a promise binding the state.

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