Geothermal Heat Pump Tax Credit

Summary

Note: The program is no longer available for new installations beginning on January 1, 2024. Applications for 2023 installations are due by May 1. 2024.

In May 2012, Iowa enacted a series of tax incentives for residential geothermal incentives (per H.F. 779). 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 in excess of the taxpayer's liability may be carried forward for up to 10 years. The tax credit must be claimed using Form IA 148 and must be submitted with Federal Form 5695.

Taxpayers who have a geothermal heat pump installed on their residence on or after January 1, 2019, and before January 1, 2024, can apply for the Geothermal Heat Pump Tax Credit with the Department of Revenue. The deadline to submit an application 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, 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.

How to Apply

The application for the Geothermal Heat Pump Tax Credit can only be completed online using GovConnectIowa. To submit an application, create a GovConnectIowa Logon. After logging in, navigate to the I Want To... tab and select Apply for a Tax Credit from the Tax Credits panel. You will need to complete the information requested on the application, upload a copy of your invoice and download, sign, and then upload the certification document available within the application.