Incentives for Solar Power in Iowa, Illinois, and Missouri


There are a variety of federal, Iowa, Illinois, and Missouri incentives available including tax credits, rebates, grants, and accelerated depreciation. These incentives depend on your entity and location.


Federal Tax Credit: 30%

30% of the total out of pocket system cost (gross system cost minus utility rebates) will be credited on your federal taxes. If you don’t use all of your credit in the first year, it will roll over.

  • Business/Commercial Cap: None
  • Residential Cap: None
  • Carry Back: 1 Year
  • Carry Forward: 20 Years

Residential/Commercial Solar System Example:
$100,000 * .30 = $30,000 Tax Credit



Tax Credit VS Deduction

A Tax Credit is BETTER THAN a deduction. A Tax Credit means that if you owe $3500 and have a $3000 tax credit available, then you will now only owe $500.

A Tax Credit does NOT mean you will get a check. For example, if you owe $2,500 but have a $,3000 credit, you will not have to pay anything but you will not receive a check. The remaining $500 will roll over and be able to be used in future years. (20 years federal/10 years state)


MACRS Depreciation For Solar Arrays

MACRS Depreciation is a tool allowing your business to deduct 85% of the cost of a new solar array over a five year period. This deduction helps reduce your total tax liability (saving you on your tax bill) and can significantly reduce your payback period.

Certain solar equipment, such as those installed by Iowa, is eligible for a cost recovery period of five years. The amount of the array that you will be able to deduct is found by reducing the appreciable basis by half of the current available Investment Tax Credit (ITC). Currently, the ITC is 30%, so the total appreciable basis must be reduced by 15% percent. This leaves 85% that can be deducted over a five year period.

In general terms, depreciation refers to the loss of value over a set period of time for an object you purchase for your business (for a specific use). Because this is a business expense, you are able to deduct this lost value from your taxable income, provided the object was used for your business.

The MACRS Depreciation is NOT a tax credit, as it will directly decrease the amount of income that is taxed rather than a decrease in the amount of tax you have to pay. However, a lower tax liability will usually mean a lower amount of owed taxes. MACRS Depreciation can be used in conjunction with applicable tax credits.

 

BONUS DEPRECIATION

There is currently a bonus depreciation that allows you to depreciate a larger percentage in the solar array’s first year of service. The remaining percentage will be depreciated under the normal MACR’s schedule. The bonus depreciation is only available for a certain amount of time.

Array Installed in 2018 – 40% Bonus Depreciation

Array Installed in 2019 – 30% Bonus Depreciation

MACRS Depreciation, alongside available tax credits and other financial incentives, can significantly reduce the payback period of your solar array. We often see payback periods of 2 and a half to five years, which leaves decades of free power for the array owners.


Illinois Adjustable Block Program / Illinois Shines

The Illinois Adjustable Block Program (commonly called Illinois Shines) is an Illinois specific program that pays you CASH for the solar that you install for your home or business. You’ll be placed in a specific ‘block’ based on the amount of power your array can produce and your payment will be based on which block you qualify for. 

To qualify for the Illinois Adjustable Block Program, you will need to work with an Illinois solar company or Illinois solar installer that has been approved by the Program.

Learn more by watching our webinar here.


Iowa Solar Tax Credit

The Iowa solar tax credit is worth 15% of the total system cost. This will be credited in the form of a tax credit on your state of Iowa income taxes. If you don’t use all of your Iowa solar tax credit in the first year, it will roll over.

  • Business/Commercial Cap: $20,000
  • Residential Cap: $5,000
  • Carry Back: 1 Year
  • Carry Forward: 20 Years

Commercial Solar System Example:
$100,000 * .15 = $15,000 Tax Credit

Residential Solar System Example:
$50,000 * .15 = $5,000 Tax Credit (CAPPED)