New Mexico solar incentives, tax credits and rebates

Financial resources for New Mexicans in 2024

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house in new mexico with solar panels on the roof

There’s no way around it: Installing solar panels is expensive. In New Mexico, a typical 8-kilowatt residential system costs $24,272 before any financial incentives. That price drops to $16,990 after considering the federal solar tax credit.

Residents can also get a 100% exemption from the gross receipts tax (similar to a sales tax in other states) on their solar equipment and a property tax exemption for the value solar panels add to their homes. There’s also a tax break on property taxes for those adding solar improvements to their homes.


Key insights

The federal solar investment tax credit (ITC) is the most significant solar incentive in New Mexico. Tax credits offset your tax liability, so it’s only useful if you owe federal income taxes in the first place.

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Residents going solar may also take advantage of additional tax credit programs through the Energy Conservation and Management Division (ECMD).

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Leasing or entering a power purchase agreement (PPA) is often cheaper upfront, but you won’t be eligible for the federal solar tax credit and other financial incentives.

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Residential solar panel incentives in New Mexico

The federal solar investment tax credit (ITC) reduces your federal tax liability by 30% of how much it costs to install solar panels. It is not a rebate or a refund. This tax credit applies to both residential and commercial installations, and it includes the cost of the solar panels and other equipment, labor and additional features for monitoring the system.

The ITC drops to 26% in 2033 and 22% in 2034.

For example, if you spend $10,000 installing a solar panel system, then ITC is worth $3,000. If in the year your system becomes operational, you owe $15,000 in taxes, then ITC reduces what you owe to $12,000. It only offsets your tax liability; you can't take advantage of the ITC if you don’t owe taxes in the first place.

The solar tax credit is nonrefundable. This means you can only claim a credit up to the amount of tax you owe for the year. However, any unused portion of the credit can carry over to reduce the taxes you'll owe in future years.

Additional solar tax incentives 

The New Mexico Energy, Minerals and Natural Resources Department (ENMRD) has the most up-to-date information about the state’s tax credits for solar market development, sustainable building, renewable energy production and agricultural biomass income.

  • Property tax exemption: New Mexico offers a property tax exemption for residential solar energy systems. This means the increased property value from installing a solar system won’t be factored into your property taxes. Homeowners should note that while this exemption exists, specific rules and eligibility may vary depending on your local municipality or county.
  • Sustainable building tax credit: This new program can offer financial benefits for homeowners who recently installed solar panels or other eligible solar equipment as part of a larger energy-efficiency upgrade. You could potentially qualify for a tax credit. This also applies if your newly built home incorporates solar and is certified sustainable. The program has annual funding limits, so apply early. You can’t claim this tax credit if you’ve already received the Solar Market Development Tax Credit for your solar panel system or solar water heater.
  • Solar energy production tax credit: New Mexico offers a program specifically for solar energy, which provides tax deductions for the electricity your solar panels generate. The credit amount reduces over ten years, but you can claim it for the full ten years from when your system starts producing power.
  • Solar market development tax credit: New Mexico offers a new state tax credit for homeowners who install new, certified solar energy systems. The SMDTC covers up to 10% of the system's cost, with a maximum of $6,000 per year. You must claim the credit on your state income tax return within 12 months of your system's installation.

More solar incentives in New Mexico

Check the DSIRE for the most comprehensive source of information about solar incentives and policies in New Mexico.

What to know about net metering in New Mexico

When your solar panels generate more power than your home can use, you can sell it to the local power grid. Instead of selling the energy for cash, you’re compensated with credits toward your next utility bill. This is called net metering.

It's important to note that net metering policies and the value of credits you receive for excess electricity can vary by electric utility provider. In New Mexico, the major electric utilities — Central New Mexico Electric Cooperative, Public Service Company of New Mexico and El Paso Electric — decide how much they want to pay customers for the energy produced by residential solar. For instance, PNM provides a 1-to-1 exchange rate for excess electricity, while El Paso Electric provides an avoided-cost rate.

Contact your specific utility for the latest and most accurate information, as policies change over time.

Renewable Energy Certificates (RECs)

Renewable Energy Certificates (RECs) payments offer an additional incentive for solar panel owners in New Mexico alongside net metering. When you generate solar energy, you also produce RECs, which represent the environmental benefits of your clean power production.

Utilities may purchase these RECs from you, providing a separate payment per kilowatt-hour (kWh) of solar electricity your system generates. This payment applies whether you use the electricity directly or send it back to the grid. REC payment rates vary based on your utility provider and the size of your solar system, with smaller systems typically receiving higher rates.

» GREENEST STATES: New Mexico ranked 38th in 2024

How much are solar panels in New Mexico?

Solar panel costs in New Mexico are typically between $10,000 and $30,000 or more, though individual costs vary. The difference between a 6-kilowatt system and a 7-kilowatt system is thousands of dollars. To estimate what size system you need, first look up how many kilowatt-hours (kWh) you used last year on your electricity bill. Divide that number by 1,200. This will be roughly the system size you need. For example, if your home used 30,000 kWh last year, you would need a 25-kW system.

Average solar panel installation cost by system size in New Mexico

Solar resources in New Mexico

Below are additional resources to guide you through transitioning to solar in New Mexico.

Find solar companies in New Mexico

A good solar company helps you navigate local incentives, permitting and net metering policies. Compare our choices for the top solar companies in New Mexico to learn more.

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FAQ

Can I get solar panels for free in New Mexico?

There are no free solar programs in New Mexico. You can lease your equipment or enter a power purchase agreement (PPA) with little to no upfront costs, though.

» FREE SOLAR PANELS: Are they really free?

How much can I save with solar panels in New Mexico?

Over 25 years, New Mexico homeowners with solar panels avoid $68,335 in utility costs on average. Even if you don’t generate 100% of your energy needs, you can still save a lot of money compared with paying traditional utility bills. Knowing your average energy consumption helps determine the size and capacity of the solar system you need. Once you know this, you can figure out potential savings and how long it should take for your solar installation to pay for itself.

Is my HOA allowed to restrict solar panels?

The New Mexico Solar Rights Act and the New Mexico Solar Recordation Act state that homeowners associations (HOAs) can not legally restrict the installation of solar panels.

How do I know if my house is a good candidate for solar?

It’s best to have plenty of unshaded roof space that faces south or west for optimal sun exposure. It’s also smart to upgrade any old, inefficient appliances first. Reducing your electrical loads now means you can get a smaller system, which will be cheaper.

The condition of your roof matters too — if it needs replacement soon, do that before installing solar panels. Installing solar panels on an old roof might mean you have to remove the panels, replace your roof and then reinstall the panels. This will cost around $5,000 for a 19-panel setup.

How can I pay for solar panels?

You can pay upfront, but most people finance solar panels through a solar loan. Since you pay it back over time with interest, it will cost more than paying upfront. You can also consider a lease or PPA (power purchase agreement).

» SOLAR PANELS: Lease vs. buy

What has New Mexico’s investment in solar been so far?

Total solar investments in the state equal $3.5 billion, according to the Solar Energy Industries Association.

Bottom line

Buying solar panels is a big upfront investment, but it turns out that it’s worth it for many homeowners, particularly in New Mexico. The ConsumerAffairs Research Team conducted an in-depth analysis to determine how much solar energy costs in New Mexico and the average solar cost in other states.

Solar panel costs: New Mexico vs. nearby states

* For 100% usage offset; ** Over 25 years

Article sources
ConsumerAffairs writers primarily rely on government data, industry experts and original research from other reputable publications to inform their work. Specific sources for this article include:
  1. DSIRE, “New Mexico Programs.” Accessed April 16, 2024.
  2. EnergySage, “The cost of solar panels in New Mexico.” Accessed April 16, 2024.
  3. SolarReviews, “How much do solar panels cost in New Mexico, 2024?.” Accessed April 16, 2024.
  4. Solar Energy Industries Association, “New Mexico Solar.” Accessed April 16, 2024.
  5. New Mexico Public Regulation Commission, “New Mexico Incentives for Customer-Owned Solar Photovoltaic Systems." Accessed April 16, 2024.
  6. New Mexico Energy, Minerals and Natural Resources Department, “Solar Market Development Tax Credit (SMDTC).” Accessed Sept. 19, 2023.
  7. New Mexico Energy, Minerals and Natural Resources Department, “Sustainable Building Tax Credit (SBTC).” Accessed Sept. 19, 2023.
  8. New Mexico Energy, Minerals and Natural Resources Department, “The Energy Conservation and Management Division (ECMD) provides technical review and certification of tax credits for several tax credit programs.” Accessed Sept. 19, 2023.
  9. New Mexico Compilation Commission, “ARTICLE 3 Solar Rights.” Accessed Sept. 19, 2023.
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