New Mexico Solar Incentives (Rebates, Tax Credits & More in 2023)

We’ll include a breakdown of all of the benefit programs available for solar conversion in your area in the table below, as well as an average expected return or effective savings.

What Do New Mexicans Need to Know About the Federal Solar Tax Credit?

The federal solar tax credit is for 30% of your system price. That amount gets applied to your income tax liability for the year you install your system.

The average system in your area costs around $18,830, putting the credit at $5,649. If, for example, you owe $6,000 on your income taxes, your tax burden would be decreased to $351 for that year. If you owe less than the credit amount, you can roll over unused credit for five years.

It’s important to note that this is not an upfront rebate, and the credit amount is not guaranteed. If you don’t owe enough on your tax bills to cover the full credit amount for five years after installation, you’ll lose any unused credit.

The federal credit was first made available in 2005 at 30% and was set to drop to 26% in 2022, 22% in 2023 and 0% in 2024. The credit rate schedule was changed in 2022 to the below:

• 30% for solar panel systems installed between 2022 and 2032
• 26% for systems installed in 2033
• 22% for systems installed in 2034
• The perk will be discontinued in 2035 unless Congress renews it again

How to Claim the Federal ITC in New Mexico

Claiming the federal credit is a quick and simple process, so it’s absolutely worth the time it takes to apply. You can follow the steps below to make sure you get the full benefit provided by this perk.

• Step 1: Install your solar array and record information about your solar panel installation company, the system size, the cost of the system and the details about where it was installed on your property.

• Step 2: When you’re ready to file your taxes, print out IRS form 5695 or make sure you answer questions accurately about installing a clean energy system on TurboTax, HR Block or whatever tax software you use.

• Step 3: Fill out the form using the information you gathered in step 1.

• Step 4: File the IRS form with your taxes or have your accountant do so. Alternatively, answer the related questions on your tax software.

EcoWatch’s Opinion on the Federal ITC in New Mexico

In our opinion, the federal credit is the most valuable solar perk you can take in your area, which is really saying something, given the number of other benefits available. The federal credit takes just a few minutes to apply for, but it provides an average value of over $5,600. It’s well worth the time and energy it takes to apply.

Again, it’s important to note that the credit won’t be as valuable to all solar customers. You’ll only be able to take the full credit if you owe an average of $1,120 per year on your tax bills for the five years following conversion.

What You Need to Know About the Solar Market Development Tax Credit in New Mexico

This incentive is New Mexico’s solar energy state tax credit. It works just like the federal credit in that it’s a percentage of your total system price that gets applied to your income tax liability. This income tax credit is also available for some energy efficiency upgrades aside from PV system adoption, like solar thermal systems.

The state credit is for up to 10% of your system installation costs or $6,000, whichever is lower. Given the typical system total of $18,830, most residents will see a credit value of around $1,883.

Just like the federal credit, this credit can be carried over to future tax years for up to five years if you can’t take the entire thing right away. As long as you expect to owe an average of just $236 per year over the next five years, though, you should be eligible for the full credit amount.

How to Claim the New Mexico Solar Tax Credit

Claiming the state credit is just as simple as claiming the federal one, but the application is significantly longer and more involved. You can follow the steps below to take advantage of the state credit.

• Step 1: Print out the form entitled Residential Solar NMAC 3.3.14 from the New Mexico Energy, Minerals and Natural Resources Department’s (EMNRD) website.

• Step 2: Fill out all applicable sections of the form, which requires some information about the cost of your system, the location where it was installed and your installer’s contact information. Many of the pages also require a contractor’s signature, so be sure to provide those pages to your installer for completion.

• Step 3: File the completed form alongside your state income taxes, or have your accountant do so for you. You should also be prompted for the necessary information when completing your tax filing on tax software.

EcoWatch’s Opinion on New Mexico’s Tax Credit for Solar Equipment

New Mexico’s statewide tax credit may not be able to match the value of the federal credit, but is one of the best state tax credits in the country. The vast majority of states offer no such credit, let alone a credit with a max value of $6,000.

All in all, this perk provides an excellent credit for what is likely to be less than 20 minutes of work on your part.

What You Need to Know About the Gross Receipts Tax Exemption in New Mexico State

This perk is really reserved for solar panel manufacturers and retailers, as it waives sales and use tax on all PV equipment. Given the average system value of $18,830 and the state’s gross receipts tax rate of between 5.125% and 8.8675%, this perk saves between $965 and $1,669 in most cases.

How to Claim the Gross Receipts Tax Exemption in New Mexico

Since this sales tax exemption isn’t offered directly to consumers, there’s no action needed on your part to take advantage of the reduced sales tax. You can simply move forward with your solar project through an installer, and the benefit will be reflected in your final purchase price.

EcoWatch’s Opinion on New Mexico’s Gross Receipts Tax Exemption

This is a great perk, in our opinion, because it offers around $1,000 in savings on PV equipment, on average. Plus, it takes no effort to take advantage of, so the benefit is entirely automatic.

What You Should Know About the Exemption for Property Taxes for Residential Solar Systems in New Mexico

Since installing a solar power system on your home is expected to raise your property value, you would normally also see a bump in your property taxes.² This exemption is for all solar equipment on your home, so the value added won’t affect your taxed-assessed value or your property taxes.

The exact amount this perk will save you varies based on many factors, like the size and cost of your system and your local property tax rate. Using the average system cost of $18,830 in your area and an average state property tax rate of 0.73%, you can assume an annual tax savings of about $137 with this incentive.

Since your system is expected to last and provide value for at least 20 years, these annual savings will add up to a total of $2,740 over time. The actual savings will be lower due to system depreciation.

How to Claim the Exemption for Property Taxes in New Mexico

Much like the gross receipts sales tax exemption, the property tax exemption in your area is automatic and doesn’t require any application or effort on your part. Your local tax assessor will simply ignore the value added by your solar energy system when determining the value of your home that can be taxed.

EcoWatch’s Opinion on the Exemption for Property Taxes in New Mexico

In our opinion, any perk that is automatic and saves solar customers money is great, and the property tax exemption fits this description perfectly. You don’t need to take any action at all other than moving forward with your system installation, and you’ll still save up to $2,740 with this perk.

What You Need to Know About Net Metering in New Mexico

Net energy metering — also just called NEM — is a popular solar policy throughout the U.S. It credits solar customers for all excess energy produced with their panels and applies those credits to future utility bills when production is lower than consumption.

Net energy metering is mandated by the New Mexico Public Regulation Commission (PRC) for all utility companies that follow its guidelines.

The PRC doesn’t mandate a specific credit rate, so many companies offer a rate per kilowatt-hour (kWh) that’s below the retail rate for electricity. This is less beneficial than the full retail rate, but it still helps minimize energy bills, maximize long-term energy savings and pay off solar systems more quickly.

Some utility providers in the state opt to offer the full retail rate, which is outstanding. These include Xcel Energy and the Public Service Company of New Mexico (PNM). Companies like El Paso Electric (EPE) offer a below-retail rate.

Unfortunately, net energy metering policies have been declining in value and availability across the country, especially in states where RPS goals have expired or been reached.

The Land of Enchantment still has a solid RPS goal to be 100% carbon-free and get all of its electricity from renewable energy sources by 2050. As such, the likelihood is that net energy metering will remain as it is for the foreseeable future.

Still, it’s possible that the policy will disappear or change to a less beneficial version of NEM at some point.

How to Enroll in Net Energy Metering in New Mexico

Most reputable solar installers in NM will enroll you in net energy metering by filing the application for you, and coordinating any necessary inspections. This is a great option, as it means you’ll see the benefits of this perk without having to dedicate any time or effort to applying. Just in case, below are the steps you can take to make sure you get access to net energy metering.

• Step 1: Check with your utility provider to make sure you have a bidirectional meter installed on your home. This is required for interconnection. If you don’t, your electricity provider should upgrade your existing one for free.

• Step 2: Reach out to a reliable and experienced PV panel installer in your area. Ask for a free quote and confirm that the installer will handle your net energy metering application for you.

• Step 3: Proceed with your solar installation.

• Step 4: Check your first few energy bills after the installation is completed to ensure that your credits are accruing.

EcoWatch’s Opinion on Net Energy Metering in New Mexico

Net energy metering has historically been one of the most beneficial perks for solar customers in the country, and that’s no exception in your area. In our opinion, net energy metering — even at a below-retail rate — is a great option and helps maximize your long-term savings and the value you see from your panels.

Not only is NEM massively beneficial from a financial perspective, but it also takes no effort for most customers to enroll in, as installation companies often handle the process on their end.

Local Solar Incentives in New Mexico

In addition to the statewide perks mentioned above, there are some local benefit programs and perks that don’t necessarily apply to rooftop solar systems. We’ll list any additional perks available in your area below and include a brief description of each.

• Community Solar Program: The State of New Mexico passed legislation that makes community solar legal and provides guidelines for the distribution of power from solar farms.³

• New Mexico Solar Easements and Rights Laws: The state government provides access to easements to ensure you can access the solar energy that would normally hit your property. It also provides every property owner — even those in homeowners associations — the right to install rooftop solar panels.⁴ The City of Albuquerque has its own laws and regulations regarding solar access as well.⁵

• Farmington Electric Utility System Net Metering: Customers of Farmington Electric have access to this special net metering policy. It provides credits at the full retail rate and lets customers cash out or roll over credits at the end of each billing year.⁶

• PNM Performance-Based Solar Program: The Public Service Company of New Mexico provides the equivalent of a Solar Renewable Energy Certificate (SREC) program for its customers. For systems under 10 kW — which includes most residential solar systems — it will award every kWh of production with $0.0025 for the first eight years. Once the credits top $20, you can get a payout.⁷

• Sustainable Building Tax Credit: This is a statewide perk that offers a tax credit for buildings and homes that are certified by the U.S. Green Building Council or the Leaders in Energy and Environmental Design (LEED) organization.

Which Tax Incentives Are the Best In New Mexico?

Now that you have an understanding of all of the solar perks available in your area, we feel it’s best to explain which we believe are the most beneficial. Below, we’ll provide three perks that we believe are most valuable and shouldn’t be missed.

The Federal Solar Tax Credit

In our opinion, the federal credit is the single most important perk to take advantage of when converting to solar. It provides an average value of over $5,600 in your area and takes just a few minutes to file for. The payout-to-time-commitment ratio is outstanding and provides you with the biggest bang for your buck, and it’s available to all taxpayers.

The Tax Credit Offered by the State

Once you solidify the federal credit, we strongly recommend focusing your efforts on the state tax credit. This provides a much lower value of around $1,800, and the application takes longer. However, the time commitment is still minimal, and the potential savings you’ll see make it worthwhile.

Net Energy Metering (NEM)

Finally, we suggest making sure you take advantage of net energy metering. Eligibility is based on your utility provider, but it is available to most customers in the area. Many residents who are serviced by some of the larger utility companies will see an outstanding retail value for the excess energy they send to the grid.

Net energy metering helps pay off your panels more quickly, pushes up your long-term savings and makes your system more valuable. Plus, most customers will find that their installers enroll for them, so the perk takes no time or effort to take advantage of.

What New Mexicans Need To Know About SRECs

Solar Renewable Energy Certificates (SRECs) — or Renewable Energy Credits (RECs) — are credits you can earn simply for producing solar energy, even if you use the generated power on site. The SRECs can usually be sold on an open SREC market for a profit.

SRECs aren’t available statewide in the Land of Enchantment, but customers of PNM can earn SRECs for eight years following installation. You might be eligible for these credits as well, so you should check with your electric company to confirm.

Are SRECs taxable in New Mexico?

Yes, SRECs are taxable in your area, so you should expect to report the money you get from selling your credits as income.

What’s The Near-Term Outlook For More Incentives In New Mexico?

The tax credits, rebates and other perks available in your area appear to be here to stay, at least for the time being. There are no plans in place to improve or reduce benefit programs in the near future.

However, many states are seeing net metering programs get less appealing or get discontinued. It’s possible that net energy metering in NM will disappear at some point.