New Mexico’s solar tax credit offers significant savings for homeowners and businesses alike. The solar energy landscape in New Mexico is rapidly evolving, making it essential for residents to understand how these benefits can directly impact their energy bills and long-term financial planning. In this guide, we’ll dive deep into the workings of the New Mexico Solar Tax Credit, how it stacks up against federal incentives, and what steps you need to take to benefit from it.
What is the New Mexico Solar Tax Credit?
The New Mexico Solar Market Development Income Tax Credit, commonly referred to as the New Mexico Solar Tax Credit, is a state-sponsored program designed to encourage the adoption of solar energy systems. By providing tax credits for both residential and commercial installations, New Mexico is fostering a cleaner and more sustainable energy infrastructure.
In 2020, New Mexico reinstated its solar tax credit, offering 10% of the total installed cost of solar systems as a tax credit for homeowners and businesses. This amount can go up to a maximum of $6,000 per system, which makes it a substantial incentive for those looking to switch to solar energy.
Eligibility Criteria for the New Mexico Solar Tax Credit
To qualify for the New Mexico Solar Tax Credit, there are a few basic requirements that must be met:
- Location: The solar energy system must be installed on a property within the state of New Mexico.
- Ownership: The applicant must be the owner of the property where the solar system is installed.
- Installation Date: The system must be installed after March 1, 2020, to qualify for the credit.
- Certification: The system must be certified and approved by the New Mexico Energy, Minerals, and Natural Resources Department (EMNRD).
How Much Can You Save with the New Mexico Solar Tax Credit?
The savings from the New Mexico Solar Tax Credit are substantial. Homeowners and businesses are eligible for a credit worth 10% of their total solar installation costs, with a cap of $6,000. For example, if you install a solar panel system costing $30,000, you could claim a $3,000 tax credit on your New Mexico state taxes.
It’s important to note that this tax credit is non-refundable, meaning that it can only be used to offset your state income taxes. However, any unused portion of the credit can be carried forward for up to five years. This means that even if you don’t have enough tax liability to claim the entire credit in one year, you can roll over the remainder to future tax years.
New Mexico Solar Tax Credit vs. Federal Solar Tax Credit
When considering solar energy, it’s crucial to understand how the New Mexico Solar Tax Credit interacts with the Federal Solar Investment Tax Credit (ITC). The federal ITC offers a 30% tax credit for solar energy system installations, which can significantly reduce the overall cost of your solar project.
Stacking State and Federal Credits
The best part? You can combine the New Mexico Solar Tax Credit with the Federal Solar ITC. For example, if your system costs $30,000, you could potentially receive a $9,000 tax credit through the federal ITC, reducing your system’s cost to $21,000. Then, you would apply the New Mexico credit, further reducing your out-of-pocket expenses by $2,100 (10% of $21,000), bringing your final cost down to $18,900. The ability to stack these incentives makes solar energy an even more attractive investment for New Mexicans.
How to Claim the New Mexico Solar Tax Credit
To claim the New Mexico Solar Tax Credit, you will need to follow a few simple steps:
- Install Your System: Ensure that your solar system is installed by a licensed contractor and meets all the necessary requirements for the credit.
- Get Certification: Once your system is installed, it must be certified by the EMNRD. This certification confirms that your system complies with all state guidelines for renewable energy installations.
- File Your Taxes: When filing your New Mexico state taxes, complete the appropriate forms (such as Form RPD-41317) to claim your solar tax credit. Be sure to include all relevant documentation, including your system’s certification from the EMNRD.
It’s also a good idea to consult with a tax professional to ensure that you are claiming the correct amount and taking advantage of all available incentives.
What Types of Solar Systems Qualify?
The New Mexico Solar Tax Credit applies to a wide variety of solar energy systems, including:
- Photovoltaic (PV) systems: These are the most common type of solar energy system and convert sunlight directly into electricity.
- Solar Thermal Systems: These systems use sunlight to heat water for use in homes or businesses, reducing reliance on conventional water heaters.
- Battery Storage Systems: While not eligible for the tax credit on their own, battery storage systems installed as part of a new solar energy system may qualify.
Residential vs. Commercial Installations
Both residential and commercial solar installations are eligible for the New Mexico Solar Tax Credit, but the details of the credit remain the same regardless of the installation type. Whether you’re a homeowner looking to lower your energy bills or a business seeking a way to cut operational costs, this credit can help make solar energy more affordable.
Economic and Environmental Benefits of Solar in New Mexico
The New Mexico Solar Tax Credit doesn’t just offer financial savings—it also supports broader economic and environmental goals. By switching to solar energy, homeowners and businesses can reduce their dependence on fossil fuels, lower their carbon footprint, and contribute to a cleaner environment. Additionally, the growth of the solar industry in New Mexico is creating new jobs, driving economic growth, and supporting local businesses.
Long-Term Savings on Energy Bills
One of the most compelling reasons to invest in solar energy is the long-term savings on your utility bills. After the initial investment, solar energy systems can drastically reduce or even eliminate your electricity costs, providing substantial savings over the lifespan of your system, which typically ranges from 25 to 30 years. By taking advantage of the New Mexico Solar Tax Credit, you can further reduce the upfront costs of your solar installation and begin reaping the rewards of clean, renewable energy sooner.
Is Now the Right Time to Go Solar in New Mexico?
Given the attractive financial incentives available through both the New Mexico Solar Tax Credit and the Federal Solar ITC, now is an excellent time for homeowners and businesses to make the switch to solar energy. The combination of state and federal incentives can reduce the cost of solar installations by up to 40%, making solar energy more accessible than ever.
As the push toward renewable energy continues to gain momentum, solar power is set to play a key role in New Mexico’s energy future. By taking advantage of the solar tax credit, you not only save money but also contribute to a cleaner and more sustainable future for the state.
