2022 New Mexico Solar Tax Credits, Rebates & Other Incentives

Here’s a quick look at the solar incentives in New Mexico:

  • Federal Solar Tax Credit (ITC)
  • New Mexico Solar Tax Credit
  • Net Metering
  • Sales and Property Tax Exemptions
  • Additional City & Utility Rebates
Ecowatch Author Karsten Neumeister

By Karsten Neumeister, Solar Expert

Updated 5/20/2022

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Our solar experts have sifted through hundreds of local governments and utility companies’ websites to find accurate information about current solar incentives in each state. We’ve also unbiasedly ranked and reviewed hundreds of solar installers to empower you to make the right choice for your home.

How Much Can You Save With Solar Incentives in New Mexico?

In this article, we’ll discuss the solar incentives and rebates available to New Mexico homeowners. When you’re ready to speak with a qualified professional, follow the links below. Each of these companies can help you identify and apply for incentives available in New Mexico.

Jump to Section:

  1. Solar Rebates, Tax Credits and Incentive Programs in New Mexico
  2. Net Metering in New Mexico
  3. Federal Solar Tax Credit
  4. FAQ: New Mexico Solar Incentives
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New Mexico residents enjoy an average cost per watt for solar equipment and, given the relatively low amount of energy needed, require a system size that is much smaller than the national average (just 7 kilowatts). However, given these averages, most homeowners in NM still pay an average of $18,760 to install a solar energy system on their homes. Despite being well below the national average, this total can still prevent homeowners from committing to this renewable energy source.

Luckily, there are a number of solar incentives provided by the federal and state governments to New Mexico homeowners that can drastically reduce the cost of going solar and be enticing enough to invest in clean energy. Below, we’ll discuss all of the solar incentives available in New Mexico and provide information on how each can lower your cost of going solar.

Disclaimer: This article is for informational purposes only. It should not be relied on for and is not intended to provide accounting, legal or tax advice.

Current Solar Rebates, Tax Credits and Incentive Programs in New Mexico

The following table gives you a quick view of the most substantial solar incentives available in New Mexico. We’ll provide a brief description next to each incentive, and we’ll go into more detail about each further below.

New Mexico Solar Incentive Description
Federal Solar Tax Credit (ITC) The federal solar tax credit has open eligibility and is available to all New Mexico residents. The credit gets applied to your federal income tax liability for the year your solar panel installation is completed and turned on. The credit totals 26% of your total solar project cost, which, in New Mexico, averages around $4,878.1
Solar Market Development Tax Credit The Solar Market Development Tax Credit is a statewide credit that gets applied to your state income tax liability for the year your system is installed and turned on, and the credit can carry over for five additional years if you cannot claim the entire credit at once. This only applies to small and moderately-sized solar arrays, and it’s good for 10% of the total system cost.2 In New Mexico, where the average system totals $18,760, the typical credit is $1,876.
Net Metering Net metering is a billing policy that allows you to offset your electricity costs. Essentially, any energy you overproduce with your panels can be “banked” with your power provider and used to reduce costs of energy when your panels underproduce.3 We’ll discuss the specifics of New Mexico’s net metering policy below.
Gross Receipts Tax Exemption New Mexico offers solar panel installation companies the Gross Receipts Tax Exemption, which prevents solar contractors from having to pay sales and use tax on solar equipment.4 These savings are passed onto you, so you won’t have to pay sales tax on the equipment either. In New Mexico, where the state sales tax is 5.125%, most homeowners will save an average of $961.
Property Tax Exemption for Residential Solar Systems When you carry out a home improvement and raise the value of your home, your assessed value will also increase, which means your property taxes will go up. Although solar panels will bump up your property value, New Mexico’s Property Tax Exemption prevents your property taxes from increasing as a result.

New Mexico Solar Tax Credit

Although the federal tax credit is available to all taxpayers across the nation, many states provide an additional state tax credit to further incentivize homeowners to convert to clean energy. New Mexico has a Renewable Portfolio Standard (RPS) goal of producing at least 20% of its energy from renewable sources by 2025 and eventually hitting 80% by 2045.5 To help achieve this, New Mexico has a state tax credit to incentivize homeowners to go solar.

solar panels on a clear day

The credit disappeared for four years but was reinstated in 2020. Homeowners throughout New Mexico can qualify for a 10% tax credit that gets applied to their state income taxes owed for the year the PV system is installed and commissioned. With an average system cost of $18,760 in New Mexico, most homeowners will get a credit of around $1,876.

If your state income taxes owed for the year you go solar are less than this amount, you can roll the remaining credit over for five years after your system is installed. The credit is set to expire at the end of 2027, and there is an $8 million limit to the credits. It’s in your best interest to install solar as soon as possible so that you don’t miss out on this tax incentive.

Other New Mexico Solar Incentives

According to the Solar Energy Industries Association (SEIA), New Mexico is a relatively solar-friendly state, so it’s not too surprising that there are some additional non-cash incentives for going solar.6 We’ll discuss the other statewide incentives below.

New Mexico Solar Sales and Property Tax Exemptions

New Mexico seeks to reduce the financial burden of going solar by offering tax exemptions. New Mexicans can enjoy both a sales tax exemption and a property tax exemption.

The sales tax exemption is technically offered to solar panel installation companies via the Gross Receipts Tax Exemption. However, solar contractors only get this exemption if they pass the savings onto customers, so you effectively will not pay sales tax on your system. Given the state sales tax rate of 5.125% and the average cost of $18,760 to go solar, most homeowners will enjoy an average savings of $961.

New Mexico’s property tax exemption is even more appealing to most homeowners. Solar panels increase your home value, and since your property taxes are based on your assessed value, your taxes would normally increase as well. The property tax exemption stops this spike in property taxes, which means you’ll enjoy a bump in value but won’t have to pay taxes on the added value like you would with any other home improvement. Over the life of your solar power system, this could mean a savings of thousands of dollars in taxes. This is especially true in areas like Albuquerque and Santa Fe, where property taxes tend to be higher.

Net Metering in New Mexico

Net metering is a billing option available throughout most of the U.S. that helps homeowners with photovoltaic systems eliminate or significantly reduce their electric bills. Even after you install solar panels, you’ll still need to pull electricity from the grid when your panels don’t produce enough energy — like at night or on especially cloudy days. You’ll be billed for whatever you pull from the grid. However, you can also produce more power than you need on sunny days or when no one is home using electricity. Net metering states that your bill for energy pulled will be reduced by whatever excess energy you send to the grid.

New Mexico mandates that all companies that are subject to Public Regulation Commission (PRC) must offer net metering to their customers. The policy does not mandate a one-to-one credit structure, meaning you might be paid slightly less for your overproduction per kilowatt-hour than you pay when you need electricity. However, the policy is still hugely beneficial.

Utility companies in New Mexico can all offer their own net metering structures. Xcel Energy, for example, provides retail rates for the excess energy you produce, so it does pay you one-to-one, making it one of the best policies in the state. PNM Resources also offers retail rates, and El Paso Electric Company uses a time-of-use (TOU) structure that pays you less than you pay per kilowatt-hour. In any case, net metering is a great way to enjoy energy savings in New Mexico.

Local Incentives

In case all of the above incentives weren’t enough to entice you to switch to solar energy, there are some additional local incentives provided in the Land of Enchantment.

group of people installing solar panels

The state has solar easement laws that guarantee all taxpayers access to solar panels and sunlight. That means strict homeowners associations, cities, villages and other governing bodies cannot prevent you from installing solar panels or enjoying full access to sunlight.

Some municipalities and utility companies in New Mexico also offer rebates for energy-efficiency updates, and others provide energy tax credits. You should check with your utility company or the DSIRE database for rebates. The credits are usually provided only to commercial customers or for homeowners building new homes via the Sustainable Building Tax Credit.

Federal Solar Tax Credit

Finally, the federal solar investment tax credit (ITC) is provided by the federal government and is available to all homeowners throughout New Mexico. It’s offered at 26% of your entire cost of going solar. With the typical system in New Mexico totaling $18,760, the federal tax credit averages around $4,878. This amount is credited to your federal income taxes due for the year you install and commission your solar system.

The federal tax credit for residential solar customers is set to drop to 22% — an average of $4,127 — in 2023, and it will no longer be available in 2024 unless Congress chooses to renew the bill. The federal tax credit for commercial solar customers will still be available at a 10% credit in 2024.

Related Topics

FAQ: New Mexico Solar Incentives

The EcoWatch team gets questions from New Mexico homeowners all the time about the many solar incentives available in the state. Below are the questions we see most often, which you might have as well.

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Karsten Neumeister

Solar Expert

Karsten Neumeister is a solar energy specialist with a background in writing and the humanities. Before joining EcoWatch, Karsten worked in the renewable energy sector of New Orleans, focusing on solar energy policy and technology. A lover of music and the outdoors, Karsten might be found rock climbing, canoeing or writing songs when away from the workplace.