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December 31, 2023

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    New Mexico is the second sunniest state in the country behind only its neighbor, Arizona, which makes it a great place to invest in solar panels. New Mexico homeowners stand to save $15,413 throughout the average 25-year life span of a typical solar system, and the average payback period in the state is around 12 years. Even better news is that going solar in New Mexico is very affordable, partly due to the state’s above-average solar incentive programs.

    While it’s a no-brainer to go solar in NM, I still recommend every resident do all they can to keep their conversion costs as low as possible. In this article, I’m going to break down everything you need to know to make the most of New Mexico’s solar incentives. I cover all the federal and state tax credits you may qualify for as a New Mexico resident and explain how to get the most out of ongoing solar programs like net metering.

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    How Does New Mexico Rank for Solar Incentives?

    The average cost-per-watt of a solar system in New Mexico is $2.68, which is just $0.02 above the national average cost. However, New Mexican homeowners can get away with a smaller system than the residents of most other states thanks to its abundant sunshine. That means the total cost of going solar in New Mexico is just $18,760, a few thousand dollars lower than the national average.

    Installing solar panels in New Mexico is even more affordable, thanks to the solar incentives available throughout the state. The federal investment tax credit (ITC) offers a 30% tax credit on all solar power systems, reducing the cost to just $13,132. New Mexico also has a 10% state tax credit, which saves you another $1,876, on average, on top of that.

    New Mexico homeowners also don’t have to pay sales tax on solar panels, and their property taxes don’t increase due to the value solar panels add to their homes, further reducing both the up-front costs and ongoing costs of switching to solar.

    Solar Incentives Available in New MexicoWhat Is It?When Can You Get It?How Much Can It Save You?
    Federal Solar Investment Tax Credit (ITC)
    Credits 30% of your entire system price to your income tax burden


    One time: Gets applied when you file your taxes after installation
    $5,628 via tax credits on average in New Mexico
    New Solar Market Development Tax CreditA tax credit worth 10% of your solar system’s total cost, up to $6,000One time: Applied to your taxes for the year your system is installed$1,876 via a tax credit on average
    Solar Energy Gross Receipts Tax DeductionSolar systems are exempt from sales tax in New MexicoOne time: Applies at the time of purchase$938 on average in New Mexico
    Property Tax Exemption for Residential Solar SystemsProperty taxes won’t go up after installationOngoing: You benefit every year when your property taxes are assessedVaries depending on your system’s value and property tax rate
    Local IncentivesTax incentives and rebates offered by utility companies and local governmentsVaries by programVaries by program
    Net MeteringAllows you to earn energy credits for all overproduction and offset utility billsOngoing: Always in effectVaries based on system size, energy needs and credit rate

    Featured Video: What Should You Know About Recent Changes to the Solar Tax Credit?


    Federal Solar Tax Credit (ITC) – How It Impacts New Mexico Residents

    My Take: The ITC is, by far, the most important solar perk to take in NM. It takes a few minutes to apply for, can reduce your system costs by 30%, and is available to all taxpayers.

    The federal ITC scheme is the largest solar incentive available in New Mexico. It’s accessible to all residents and more than worth the moderate effort it takes to claim.

    The federal solar tax credit lets you claim 30% of your system’s total cost as a credit toward your federal tax burden in the year you install the system. It’s important to realize that this is a tax credit and not a rebate, so it only applies to taxes you owe. If your credit exceeds the amount you owe in the year you install your solar panels, you can roll the credit over to the following year.

    The average cost of a solar panel array in New Mexico is $18,760, which means that the average savings in the state from the federal ITC is $5,628. Note that these averages are for a 7-kW system, which is the statewide average size needed to offset the typical New Mexico household’s monthly energy bill.

    If you’re considering converting to solar power and want to take advantage of the federal tax credit, you have until 2034. The federal government plans to phase out the ITC starting in 2033. The current state of the ITC’s credit amounts by year through 2034:

    • 30% of your total system value for solar photovoltaic (PV) systems installed before 1/1/2033.
    • 26% of your total system value for solar PV systems installed after 12/31/2032 and before 1/1/2034.
    • 22% of your total system value for solar PV systems installed after 12/31/2033 and before 1/1/2035.
    • ITC discontinued for systems installed after 12/31/2034.

    Congress has already voted to extend the ITC once as part of the Inflation Reduction Act, but I don’t recommend waiting to see what happens next. It could easily decide to limit or discontinue the program earlier than expected, so it’s best to invest in solar energy now.

    Steps to Claim the Federal Solar Tax Credit in New Mexico

    There are a few steps you need to take to claim the federal ITC. You can fill out and file the forms yourself, but I recommend consulting a certified public account (CPA) to ensure you do it correctly.

    Here are the steps you need to take to claim the federal solar energy tax credit in New Mexico:

    1. Download form 5695 from the IRS website.
    2. Fill out part 1 of the form to calculate your tax credit. Solar systems go under “qualified solar electric property costs.” Your system’s cost goes in line 1, and calculations 6a and 6b determine your credit amount.
    3. If you haven’t installed any other renewable energy systems in your home and don’t have any rollover credits, skip to line 13. Otherwise, fill out the relevant lines to claim additional credit or add your rolled-over credits to the current tax year.
    4. Use the Residential Energy Efficient Property Credit Limit Worksheet found here to calculate your tax liability limitations.
    5. Use the information you entered to complete the calculations on lines 15 and 16.
    6. Don’t forget to include your tax credit from line 15 on line 5 of your 1040 when you file your tax return for the year. Again, I recommend consulting a CPA.

    It’s worth repeating that the federal ITC is a tax credit, so you won’t get any benefit unless you owe taxes for the year.

    solar rebates and tax credits in new mexico

    Which Solar Incentives Are Offered at the State-Level in New Mexico?

    New Mexico has several state-level programs that encourage its residents to invest in solar energy and other renewable energy home improvements. The State of New Mexico administers these programs, which apply to all the state’s residents.

    The following sections will cover these state-level incentives:

    • New Solar Market Development Tax Credit
    • Solar Energy Gross Receipts Tax Deduction
    • Property Tax Exemption for Residential Solar Systems

    New Solar Market Development Tax Credit in New Mexico

    My Take: Aside from the ITC, this is what I believe is the most important perk to take in New Mexico. Provided you owe enough in taxes to take the full thing, it can make solar super affordable, especially in combination with the federal credit.

    This is a personal income tax credit worth 10% of the total cost of your solar system, up to a maximum of $6,000.

    The New Solar Market Development Tax Credit is New Mexico’s state-level version of the federal ITC. It is an income tax credit New Mexico residents can claim to reduce their tax liability for the year they install a solar photovoltaic (PV) system. The credit is equal to 10% of the total cost of your solar system or $6,000, whichever is less.

    In practice, your solar panel system will almost certainly cost less than $60,000, even if you purchase a high-end system, so you shouldn’t run into the $6,000 limit. Unlike the federal ITC, if your tax credit exceeds your liability in the year your system is installed, you will receive the extra money as a tax refund.

    Solar systems must be at least 100 W to be eligible for the program, which is a low enough limit that you can safely ignore it. For comparison, the average system size in New Mexico is 7 kW, equivalent to 7,000 W.

    Steps to Claim New Mexico’s New Solar Market Development Tax Credit

    Claiming the New Solar Market Development Tax Credit is relatively simple. Here’s what you need to do:

    1. Purchase and install a solar photovoltaic system. Ensure it’s at least 100 W.
    2. Obtain the documents you need for the application. You need a currency property tax bill or other proof of ownership for your residence, a bill of materials for your solar system — including installation costs — and a building inspection code report. You will also need to request the schematic sheet for your solar system if it’s not included with the bill of materials from your solar installer.
    3. Apply for the tax credit on the Energy Minerals and Natural Resources Department (EMNRD) website. You can find the online application here.
    4. Wait to receive your certificate of eligibility from EMNRD. The review process takes between three and four weeks, on average.
    5. Claim your tax credit with the state Taxation and Revenue Department.

    Your installation company should be able to help you with the process if you run into any trouble, especially if you choose an installer from this curated list of the best solar companies in New Mexico.

    Solar Energy Gross Receipts Tax Deduction in New Mexico

    My Take: This is automatically applied to your solar costs to provide savings, which makes it a great perk, in my opinion.

    This sales tax exemption applies to solar energy system purchases. Technically, this applies to solar retailers, but in practice, it lowers the cost of solar for customers since most companies pass the savings on to the consumer.

    New Mexico’s 5.0% sales tax doesn’t apply to most clean energy technologies, including solar systems. With the average price of solar panels in New Mexico hovering around $18,000, this exemption can save you around $900.

    Something to be mindful of is that this sales tax exemption really means that companies that sell solar panels don’t have to collect sales tax. While most retailers pass these savings on to customers, some of them see it as an opportunity to raise prices, hoping to take advantage of unwitting patrons who don’t realize that they shouldn’t be charged as much.

    Steps to Claim the Solar Energy Gross Receipts Tax Deduction

    You don’t have to do anything to claim this sales tax deduction since it doesn’t apply directly to consumers. The savings make purchasing a solar system in New Mexico more affordable, but it won’t directly lower the prices you’re quoted from solar contractors.

    Property Tax Exemption for Residential Solar Systems in New Mexico

    My Take: One major downside to going solar is that it can increase your property taxes, but this incentive prevents that from happening. Over the lifespan of your system, this could save you thousands.

    New Mexico doesn’t include the increased value of your home due to solar panels in your property tax assessment. This saves the average homeowner a few thousand dollars throughout their solar system’s life span.

    Adding solar panels to your home increases its value, which normally means your property taxes would go up. Luckily, New Mexico offers a property tax exemption for residential solar systems which prevents the value of your solar system from being included in your property tax assessment.

    A study conducted by real estate tech company Zillow a few years ago found that solar panels add about 4.1% to home values. The average home price in New Mexico is approximately $290,000, and the average property tax rate in the state is 0.73%. Combining all those numbers, solar panels would add almost $90 per year to your property taxes if it weren’t for the exemption of the property tax.

    The bottom line is that over the 25-year life span of most solar systems, the property tax exemption amounts to a lifetime savings of about $2,250.

    Steps to Claim New Mexico’s Property Tax Exemption for Residential Solar Systems

    Your property tax assessor will simply ignore the value of your solar panels when determining your property tax liability, so you don’t have to do anything to claim the property tax exemption.

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    Which Solar Incentives Are Offered at the Local Level in New Mexico?

    New Mexico also has solar incentives at the local level. These programs are only available to residents in specific locations and are often administered by local utility companies and governments.

    Here’s a brief overview of some local solar incentive programs that might apply to you, depending on where you live.

    • Community Solar: New Mexico has legalized shared community solar projects legal throughout the state. This means that residents can purchase electricity from a shared panel array, sort of like purchasing energy from a tiny, localized power company. Community solar projects can generate up to 5 megawatts, and no single member can purchase more than 40% of the project’s total energy output.
    • Sustainable Building Tax Credit: New Mexico provides tax credits to individuals who own certified green buildings that meet the requirements defined by the U.S. Green Building Council. Unfortunately, this credit cannot be used for solar systems already used to claim the New Solar Market Development Tax Credit I discussed above.
    • Farmington Electric Utility System Net Metering: This program is only for Farmington Electric customers. It compensates homeowners for any excess energy their systems produce at the full retail rate. Municipal Utilities like Farmington are not regulated by the New Mexico Public Regulation Commission (PRC) and are free to set their own net metering rules. I’ll discuss net metering in more detail in the next section.
    • City of Albuquerque Solar Easement Laws: Albuquerque protects property owners’ rights to install and access solar energy via rooftop solar installations. This means that property owners cannot be prevented from accessing solar energy by other parties, including homeowners associations.
    • PACE Financing: Property Assessed Clean Energy (PACE) financing lets you tie your solar loan to your property rather than your person. That means you can get a no-money-down loan and pay it off over time through an increased property tax bill. If you move, the loan gets transferred to the new owner of your home. This financing is available throughout New Mexico, including Santa Fe, Albuquerque, and Las Cruces. PACE financing can be used to finance photovoltaic systems, geothermal systems, and solar thermal systems.

    Net Metering in New Mexico – Can You Profit?

    New Mexico’s net metering — or net energy metering (NEM) — differs depending on the size of your solar system and what utility company you have.

    For systems less than or equal to 10 kW — which applies to most residential systems in the state — the electric company has a choice for how it compensates customers for the extra energy their systems produce. The company may compensate the customer by:

    • Crediting the customer for the net excess generation at the utility’s avoided-cost rate, which is how much it costs the utility company to produce an equivalent amount of energy. The avoided-cost rate is always lower than the retail rate you pay for energy from your utility.
    • Crediting the customer for the amount of kilowatt-hours (kWh) their system produces to be used to offset usage later. Renewable energy credits (RECs) can be rolled over from month-to-month. This is less beneficial for customers if their system produces far more energy than their home uses, but it is better if your overproduction is small. Utility companies must pay out unused credits at the avoided-cost rate if the customer leaves the system.

    Here’s how the rates work for some of New Mexico’s utility providers:

    • PNM Resources (Public Service Company of New Mexico): Uses kWh credit for excess production
    • Xcel Energy (Southwestern Public Service Company): paid at the avoided-cost rate when the total net metering credit exceeds $50. Net metering credits below $50 are rolled over to the next billing period.
    • El Paso Electric Company: Paid at set rates per kWh. Specific rates can be found for each month here.

    Practically speaking, net metering helps keep monthly energy bills down more than it produces a profit for most residential customers. Solar panels don’t produce energy continuously since energy generation is reduced at nighttime and on cloudy days. Buying a larger system than you need could turn you a profit if your electric company pays you per kWh rather than in credits, but the higher up-front costs of a larger system probably aren’t worth it.

    I often get asked about how net metering compares with storing excess energy yourself by adding a solar battery to your solar panel installation. In general, solar batteries are worth it if you live somewhere that doesn’t have a net metering program or if the compensation rates are too low to make a big enough dent in your energy bills.

    Solar batteries also protect you from power outages since you can pull power from the battery during blackouts. New Mexico’s net metering programs are good enough that you don’t need a solar battery, but considering that the state is prone to power outages, it can be a good idea. Remember that solar batteries like the Tesla Powerwall are quite expensive and will increase the cost of your system by about 50%, on average.

    Steps to Enroll in Net Metering in New Mexico

    Your solar installer should enroll you in net metering during your installation, but here are the general steps that need to be taken:

    1. Make sure you have a bidirectional meter installed. Your utility company needs to monitor energy flow in both directions to determine how much excess energy your system produces.
    2. Work with your solar company to fill out the applications and apply for net metering with your utility provider.
    3. Once your system is up and running and you’re enrolled in net metering, monitor your monthly energy consumption and electric bill to ensure you’re being compensated for any extra energy your system generates.
    solar incentive programs in new mexico

    Watch Out For Solar Incentive Scams in New Mexico

    It’s important to know about a few common solar incentive scams to avoid being cheated out of your hard-earned money. Residential solar is becoming more popular in the Land of Enchantment every year, and scammers are targeting potential solar customers, hoping to make a quick buck.

    Here are the most common scams to look out for when considering solar in New Mexico:

    • Fake Incentives: This scam targets people looking to save money by applying for solar incentives. The scammer solicits you about a promising solar incentive, saying that all you have to do is pay a one-time application fee and then enjoy money off your solar installation. The scam is that the incentive doesn’t exist. Once you pay to submit your “application,” you never hear from the scammer again.
    • Upcharge scams: Whether these are technically scams or not doesn’t matter since either way you wind up losing money. Some less reputable solar companies upcharge for products and services far beyond the normal markup, charging you one-and-a-half to two times more than fair market value for solar equipment. If you don’t get multiple quotes from different installers, it can be difficult to tell when you’re being taken advantage of. Remember, on average, solar systems cost $18,000 in New Mexico before any incentives.
    • Overstated incentive benefits: Some solar installers take it upon themselves to include certain solar incentives in the price they quote you. The most common incentives they include are the federal ITC and the New Mexico state solar tax credit since these combine for several thousand dollars worth of tax credits. Of course, you must claim these incentives to get a tax credit, so including them in cost estimates is intentionally misleading. As long as you go with a reputable solar company, you shouldn’t have to worry about this.

    Bottom Line: Do the Incentives in New Mexico Make Going Solar Affordable?

    New Mexico’s solar incentives make it very affordable to convert to solar power, which is good news because New Mexico is one of the best states in the country for rooftop solar systems. The federal ITC and New Mexico’s state solar tax credit are the two biggest incentive programs available to New Mexico residents, but the state also has a property tax exemption and sales tax exemption to help keep costs down and make going solar worth it.

    New Mexico’s net metering policy leaves the details of compensation up to individual power companies, which means you’ll have to check with your local electric company for the specifics, but overall net metering can help you save money each month by lowering your electricity bill. These programs will likely change, so now is the time to make the switch if you’re on the edge.

    You can use the handy tool below to get quotes from your area’s best solar installers.

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    FAQs About New Mexico’s Solar Rebates and Incentives

    Does New Mexico have a solar tax credit?

    Yes, the New Mexico state government offers a 10% tax credit for solar PV systems, which averages between $1,700 and $1,900, depending on your system’s size and features. This is not to be confused with the federal solar tax credit, which is worth 30% of your system’s total cost and applies to your federal tax burden. New Mexico taxpayers are eligible for both tax credits and can save more money by claiming both.


    Is it worth going solar in New Mexico?

    Yes, going solar in New Mexico is almost always worthwhile. New Mexico gets more sunshine than every state in the country except for Arizona. That means that New Mexico homeowners can get away with a smaller solar installation than the residents of most states, which makes going solar very affordable. New Mexico’s solar incentives lower the cost of solar even further, with the average system costing just over $12,000 after accounting for the savings from the federal and state solar tax credits. Bear in mind that these estimates are for cash purchases. Leasing or financing solar panels with a power purchase agreement (PPA) will lead to far lower lifetime savings.


    Does New Mexico buy back solar energy?

    In a way, yes, the State of New Mexico does buy back excess solar energy. New Mexico law requires electric companies to participate in net metering, which lets solar customers sell excess energy their panels generate back to the grid for energy credits. The rate you receive varies depending on what utility company you have. You’re basically selling your extra electricity to your electric company to offset later consumption.


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