Quick Answer
September-March for Northern Lights and ice caves. June-August for midnight sun, highland roads, and puffins. Neither is wrong — they're two different Icelands.
Northern Lights Season (September–March)
The aurora borealis is visible from late September through March when nights are long and dark. Peak activity is October-November and February-March. Success depends on two things: clear skies and solar activity. Check the Icelandic Met Office aurora forecast (vedur.is) nightly. Drive away from Reykjavik light pollution — the Snæfellsnes peninsula and Vik are excellent spots. Ice cave tours inside Vatnajökull glacier run November-March only.
Midnight Sun Season (June–August)
From mid-June to mid-July, the sun barely dips below the horizon. You get 20+ hours of golden light — incredible for photography and hiking. Highland interior roads (F-roads) open in late June, revealing the raw volcanic interior. Puffins nest on sea cliffs May-August. This is peak tourist season: prices are highest, the Ring Road is busy, and accommodation books out months ahead.
Shoulder Seasons (April–May, September)
May is underrated: longer days, waterfalls roaring from snowmelt, fewer tourists, and lower prices. September offers a chance at both Northern Lights AND decent daylight hours — the best of both worlds. April can be icy and unpredictable but whale watching season begins.
What It Actually Costs
Iceland is expensive regardless of season. Budget $150-200/day minimum. Summer accommodation averages $150-250/night. Grocery stores (Bónus, Krónan) save enormously versus restaurants. Fuel for the Ring Road costs roughly $200-300 total. Camping with a rental campervan ($100-150/day) is the most cost-effective way to see the country.