The New Mexico Solar Tax Credit: Important Details

New Mexico Solar Incentives
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The New Mexico Solar Tax Credit Details

Most potential solar homeowners know of the federal solar tax credit, which takes 26% of the cost of your solar array and credits it to your income taxes. The credit tends to be widely covered since it is offered to all Americans who install solar. However, state-level solar incentives are not covered as often. This is a mistake. State-level incentives are sources of big savings for people interested in going solar.

New Mexico, in particular, has a wide array of solar incentives available to solar homeowners. These incentives include a state income tax credit, a property tax exemption, and a solar sales tax exemption. Let’s take a closer look at each of these to see the kinds of savings you can expect.

New Mexico Solar Income Tax Credit

The New Mexico Solar Income Tax Credit works very similarly to the federal ITC. Following the purchase of a solar installation, the homeowner can file for a New Mexico state tax credit. This credit is worth 10 percent of the cost of the system or $6,000, whichever is lower. 

Applying for the New Mexico Solar Tax Credit

The state tax credit had originally been allowed to lapse. However, Governor Grisham brought it back early in 2021. Solar advocates lauded the choice as a victory for renewable energy. To apply for the New Mexico solar tax credit, a form needs to be completed, which should be provided to you by your solar installation company. Additionally, the installation needs to be certified by the Energy, Minerals, and Natural Resources Department (EMNRD). Once this is done, the solar installation should then qualify for the New Mexico solar tax credit.

Benefits of the Income Tax Credit

Alongside the federal income tax credit, the state-level income tax credit is going to be one of the biggest sources of solar savings. The New Mexico income tax credit is usually worth more than a thousand dollars. That thousand dollars can help cover a significant chunk of your solar costs.

New Mexico Property Tax Exemption

The second major tax credit is a property tax exemption. The exemption applies to increases in the value of your home that come from installing solar. Studies have shown that solar installations increase your home by close to $6,000 per kilowatt installed or up to four percent of the total value. 

As major home improvements tend to lead to an increase in home value, they also lead to an increase in property taxes owed. To help homeowners avoid a big increase in property taxes, the state of New Mexico has implemented an exemption. This exemption applies to all increases in home value that stem from solar equipment. Therefore, installing solar on your home will not lead to an increase in taxes in any way. 

New Mexico Sales Tax Exemption

The last of the big tax savings that New Mexico solar homeowners can qualify for is a sales tax exemption. Known as the Gross Receipts Tax (GRT) Exemption, this particular incentive covers the sales taxes on all solar-related products that go into your installation. 

Sales taxes on solar panels can be several hundred dollars — and that’s without getting into the taxes on things like your solar inverter, your panel mounting system, and potentially your battery backup system. Getting rid of the sales taxes on these items is an often overlooked way of getting even more savings out of your solar installation. 

The sales tax exemption should be worked out for you by the one selling the solar products. Once the seller has received approval from the state government, they can apply the exemption to the sales tax. Other than filling out form RPD-41341, there isn’t much else that you need to do. 

Other Incentives Available for New Mexico Homeowners

Finally, there are some non-tax-credit incentives available for New Mexico residents. These incentives come at the utility level and provide additional savings for homeowners from non-government sources. The main source of utility-level solar incentives is PNM, but there are other companies that also provide incentives.

Net Metering in New Mexico

Net metering is a major solar incentive and potentially one that can make or break your installation. Net metering is when you send excess electricity produced by your solar panels to the electrical grid, which you are then compensated for by your utility company. 

PNM offers the full retail rate for the power you put back onto the grid. The full retail rate is the best available and can potentially eliminate your power bill completely, even if you pull energy from the grid at night. 

New Mexico’s Renewable Energy Credit Program

Finally, New Mexico offers a renewable energy credit program. The program came into existence as part of New Mexico’s renewable energy portfolio, where it serves the purpose of allowing utility companies to decentralize their clean energy production. Each kilowatt of energy your solar installation generates also produces one renewable energy credit, which can then be sold on the marketplace for cash. When taken together, we can see that New Mexico offers many state-level, and utility-level, incentives for homeowners to go solar. For this reason, New Mexico is one of the best states to go solar in all of America. 

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