Solar isn’t just for the rich or the ultra-green anymore. In New Mexico, it’s become a practical and affordable solution for everyday homeowners. In fact, New Mexico once ranked 9th in solar installations according to the Solar Energy Industries Association (SEIA).
And that’s thanks in large part to the state and federal incentives available
If you’re still holding back because of the price tag, this guide will walk you through the cost reductions and savings that prove those fears might be outdated.
Federal Solar Tax Credit (a.k.a. the ITC)
The Federal Solar Investment Tax Credit (ITC) gives you back 30% of your total solar installation costs in the form of a tax credit. So if your solar setup costs $20,000, that’s a whopping $6,000 in savings.
This credit includes not just panels, but inverters, batteries, wiring, labor, and pretty much everything tied to the system.
Anyone who owns their solar system — rather than going with a leasing option — qualifies. You must also have enough tax liability to absorb the full credit, though any unused amount can roll over for future years.
To avail of this incentive, you simply have to file IRS Form 5695 with your tax return.
Originally, this tax credit was set to drop gradually — 26% in 2020, 22% in 2021, and even lower afterward — until it was extended by Congress under the Inflation Reduction Act. The extension locks in the full 30% credit until 2032.
That said, it’s one of the biggest reasons solar has become so much more accessible for homeowners in New Mexico and across the U.S.
Solar Market Development Tax Credit (SMDTC)
On top of the federal credit, New Mexicans get a state-level 10% tax credit, up to $6,000, thanks to the Solar Market Development Tax Credit.
This means that for the same $20,000 system you had earlier, the state will give you $2,000 back in tax credits.
Combined with the federal one, that’s $8,000 knocked off your upfront cost.
But here’s something you should know: There’s a yearly cap of $30 million (previously $12 million before the cap increase was signed in 2024) on this program. Once that funding runs out for the year, you won’t be able to claim the credit until the next year’s cycle opens up.
It’s a first-come, first-served basis, which is why applying early matters.
To take advantage of this benefit, you must apply through the New Mexico EMNRD’s online portal within 12 months of installation and submit all required documentation.
Property Tax Exemption
When you install solar panels, your home value usually goes up — and naturally, so do your taxes. But thanks to New Mexico law, NMSA 1978, § 7-36-21, your property tax bill stays the same.
Put simply, the law says something like this: Any physical improvements made to a residential property may trigger tax increases — except for solar energy system installations.
That means, if you’ve ever thought about selling your solar-equipped home down the line, you won’t face additional tax penalties eating into your resale profits.
The exemption is automatic for both home rooftop and ground-mounted solar systems. No paperwork needed.
Solar Energy Gross Receipts Tax Deduction
In New Mexico, the Gross Receipts Tax (GRT) is essentially a sales tax, ranging from 5% to 9% depending on your area. Solar equipment and installation costs are exempt from this tax, as outlined in NMSA 1978, § 7-9-112.
Let’s say your system is $20,000 and your local GRT is 7%. That’s $1,400 in tax savings off the bat.
Like the property tax exemption earlier, this sales tax deduction is automatic.
Net Metering
Net metering is an agreement where any excess power your solar system generates gets sent back to the grid and, in the process, earns you “energy credits” on your utility bill.
You can then use those credits to draw grid electricity when you need it, such as at night or on cloudy days — which means zero or near-zero monthly electric bills are a real possibility.
In New Mexico, this is coded under NMAC 17.9.570 or “Rule 570”, which states that there are two legally allowed options for how a utility in New Mexico can handle excess solar generation:
- Crediting the customer for the net kilowatt-hours (true net metering)
- Crediting or paying the customer at the utility’s energy rate (net billing)
Below is a summary of how popular utilities in New Mexico handle it:
Utility | How Net Metering Works |
True net metering. Excess energy is credited in kWh at full retail value. Unused kWh credits roll over month to month indefinitely. | |
Net billing. Monthly excess energy is converted to $ credit at the Locational Marginal Price (LMP). Credits roll over until they reach $50, at which point a cash payout is issued. | |
Net billing. Excess solar is converted to $ credit at EPE’s avoided cost rate, which changes monthly. Like Xcel, credits roll over until they hit $50, then a payment is made. | |
Net billing. Excess generation is credited monthly at KCEC’s avoided cost rate, which is filed annually each January with the NMPRC. No kWh rollover as credits apply monthly. |
Your certified solar installer will typically handle communication with your utility provider and take care of all the necessary application documents for you.
Sustainable Building Tax Credit (SBTC)
The Sustainable Building Tax Credit is a state-backed incentive that rewards homeowners for building or renovating highly efficient, eco-certified homes.
Basically, if you upgrade your home to meet green building certifications — like LEED, Build Green, or Energy Star — and include solar, you can claim an income tax credit of up to $6.75 per square foot, as per NMSA § 7-2-18.32.
For a 2,000 sq. ft. home, that’s potentially $13,000 in credits.
That said, this incentive doesn’t directly reward your solar panels — but it does make it more affordable to build a home that’s optimized for solar from the start.
To qualify, you must apply to the Energy, Minerals and Natural Resources Department (EMNRD) to have your newly-built or upgraded home reviewed for a Certificate of Eligibility. If approved, you’ll receive a certificate showing your credit amount.
After which, you must file that certificate with the New Mexico Taxation and Revenue Department (TRD) when you do your state taxes.
Some important caveats to keep a mental note of:
- Funding is limited each year, which means you can’t get a certificate until the next calendar year. You can see the full cap limits on the EMNRD website.
- If you claimed a Solar Market Development Tax Credit for your solar panels, you can’t use that same system to qualify your home for the SBTC.
Residential Energy Conservation Subsidy Exclusion
If your utility gives you a rebate to go solar — say $1,000 — you might assume it’s taxable income. But the IRS says you can exclude this from your taxes.
This rule, outlined in IRS Publication 525, means you keep the full value of any utility rebates or incentives related to energy conservation.
As of now, there are no utility-initiated rebates for solar in New Mexico. However, if and when they do become available, here’s the good news: you won’t need to file anything — you just keep the full rebate, tax-free.
Energy-Efficient Mortgages (EEMs)
Energy-Efficient Mortgages allow you to bundle solar costs into your mortgage. Offered by the Federal Housing Administration (FHA), the Department of Veterans Affairs (VA), and some conventional lenders, these loans stretch the cost over 15–30 years at mortgage-level interest rates.
That means homebuyers or homeowners who are refinancing won’t need a separate loan or a large upfront payment, both of which can be costly.
To apply, simply inquire with your lender about EEM options (FHA, VA, or Fannie Mae), and they’ll guide you through the specific steps needed to proceed.
Your Solar Savings Start With the Right Installer
If you’re living in New Mexico, you’re lucky to be in one of the best states to go solar. With all the generous state and federal incentives stacked in your favor, you’re looking at thousands shaved off your upfront costs right from the start.
But imagine how much more you could save if you had the right solar installer — someone who designs a system built to match your actual home energy needs and goals.
At Quote for Solar, we connect you with vetted, certified local installers who know how to make solar work for you. Request a quote today, and we’ll send you three competitive bids from trusted solar professionals near you.
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