Geothermal installations beginning on or after January 1, 2019 must apply for a Geothermal Heat Pump Tax Credit. The deadline to submit an application is May 1 following the year of installation.
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 installation 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.
Once issued Geothermal Heat Pump Tax Credits reach the maximum amount of tax credit awards, the Department will establish a waitlist on a first-come, first-served basis. An application on the waitlist, as described above, shall not constitute a promise binding the state.
Completing the form with the requested information does not guarantee that you will be awarded a Geothermal Heat Pump Tax Credit. The availability of the tax credit and approval of the tax credit applications are contingent upon the availability of the tax credits in that particular year.
The Geothermal Heat Pump Tax Credit was available for installations beginning on or after January 1, 2012 through December 31, 2016. The credit was 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. This credit did not require an award and the taxpayer could claim the credit, if eligible, on the individual income tax return. The taxpayer was also required to submit federal form 5695, Residential Energy Credits, in addition to the Schedule IA 148 with the tax return on which the Geothermal Heat Pump Tax Credit is claimed.
The Geothermal Tax Credit was available for installations beginning on or after January 1, 2017 through December 31, 2018. This credit is available for installations on or after January 1, 2017, but only in tax years in which the federal residential energy efficient property tax credit for geothermal heat pumps is not available. The federal credit expired December 31, 2016 but was extended retroactively by the federal Bipartisan Budget Act of 2018; however, Iowa did not couple with that bill during 2017 or 2018. Therefore, this credit is available for tax years beginning on or after January 1, 2017, for installations completed before December 31, 2018.
Taxpayers filing a claim for the Geothermal Tax Credit must submit Form IA 140 in addition to Schedule IA 148 with the individual income tax return. The tax credit equals 10% of the taxpayer’s qualified expenditures on equipment that uses the ground or groundwater as a thermal energy source to heat the taxpayer’s dwelling, or as a thermal energy sink to cool the dwelling. The equipment must meet the federal energy star program requirements in effect at the time the expenditure is made. The dwelling must be the taxpayer’s residence and be located in Iowa.