New Mexico Solar Tax Credits and Incentives: A 2023 Homeowner's Guide

New Mexico has long positioned itself as one of the more solar-friendly states in the country, and in 2023 that reputation holds up. Between abundant sunshine, a reinstated state tax credit, and a sharply increased federal tax credit, homeowners who install a residential solar system this year have access to one of the strongest combined incentive packages in recent memory.

This guide walks through the solar incentives available to New Mexico homeowners in 2023, how they interact, and what to keep in mind before signing a contract.

The New Solar Market Development Tax Credit

The centerpiece of New Mexico's residential solar incentives is the New Solar Market Development Income Tax Credit, signed into law in 2020 and administered by the New Mexico Energy, Minerals and Natural Resources Department (EMNRD).

The credit covers 10% of the purchase and installation cost of a qualifying solar thermal or photovoltaic system, capped at $6,000 per taxpayer. It is a nonrefundable credit, meaning it can reduce a homeowner's state income tax liability to zero but will not generate a refund on its own. Unused credit amounts can generally be carried forward for up to five years.

To claim the credit, homeowners must have their system certified by EMNRD before filing. The program has an annual statewide cap of $12 million in certifications, and the department issues certificates on a first-come, first-served basis, so applying promptly after installation is important.

The Federal Residential Clean Energy Credit

Homeowners in New Mexico can stack the state credit with the federal Residential Clean Energy Credit. Under the Inflation Reduction Act, which was signed into law in August 2022, the federal credit was increased to 30% of the installed cost of eligible solar electric, solar water heating, battery storage, and related systems. That 30% rate applies to systems placed in service from 2022 through 2032.

The federal credit is nonrefundable but carries forward to future tax years if it exceeds the homeowner's tax liability. Unlike the state credit, there is no dollar cap on the federal credit for residential solar.

For a typical $20,000 rooftop system, combining the 30% federal credit with the 10% state credit can reduce the net cost by roughly $8,000 once both are applied, subject to each homeowner's tax situation.

Property Tax Exemption

New Mexico also exempts the added value of a residential solar energy system from property tax assessment. When a homeowner installs solar, the system typically increases the market value of the home, but state law directs county assessors not to include that added value in the taxable valuation. The practical effect is that going solar does not raise a homeowner's property tax bill.

Gross Receipts Tax Deduction

New Mexico's Solar Energy Gross Receipts Tax Deduction allows qualifying sellers and installers to deduct receipts from the sale and installation of solar energy systems from gross receipts tax. While the deduction is claimed by the business, installers commonly pass the savings through to customers in the form of lower quoted prices.

Net Metering

Investor-owned utilities in New Mexico, including PNM, El Paso Electric, and Xcel Energy's Southwestern Public Service, offer net metering for residential solar customers. Excess electricity sent to the grid is credited against future consumption, typically at the retail rate or a rate approved by the New Mexico Public Regulation Commission. Homeowners should confirm the current tariff and interconnection requirements directly with their utility before installing, as specifics vary by service territory.

Low-Income and Rural Programs

Income-qualified homeowners may have access to additional support. The federal Weatherization Assistance Program, administered in New Mexico by EMNRD, does not directly fund solar but reduces overall home energy use and can be paired with solar planning. Rural homeowners may also qualify for USDA Rural Development loans and grants for renewable energy improvements under programs such as the Rural Energy for America Program (REAP), which primarily targets agricultural producers and small rural businesses but is worth reviewing for eligible properties.

Practical Steps for 2023

Homeowners considering solar in New Mexico this year should:

• Request multiple itemized bids that clearly show hardware, labor, permitting, and interconnection costs.
• Confirm that the installer is licensed in New Mexico and familiar with EMNRD's certification process for the state credit.
• Verify utility interconnection requirements and expected net metering terms in writing before signing.
• Consult a tax professional to confirm how both the state and federal credits apply to their specific tax situation, including carryforward rules.

With the 30% federal credit locked in through 2032, the 10% state credit available up to $6,000, a property tax exemption on the added value, and a gross receipts tax deduction that can lower installation pricing, 2023 remains a strong year for New Mexico homeowners to evaluate rooftop solar.