New Mexico Solar Tax Credits: What Homeowners Need to Know in 2026
By Team Epex· Epex Home Performance
New Mexico homeowners can reduce solar installation costs by 40% using two tax credits: the 30% federal Investment Tax Credit (ITC) and the 10% New Mexico Solar Market Development Tax Credit (up to $6,000). On a $25,000 system, that's $10,000 in combined tax savings — bringing the net cost to $15,000 before energy bill savings.
The Two Tax Credits Every NM Homeowner Should Know
If you're considering solar in New Mexico, two tax credits can dramatically reduce your cost. Here's how they work and how to claim them.
Federal Solar Investment Tax Credit (ITC) — 30%
The federal ITC allows you to deduct 30% of your total solar installation cost from your federal income taxes. There's no cap on the amount, and it applies to both the equipment and labor costs.
Key facts:
- Available through 2032 at 30%, then steps down to 26% in 2033
- Applies to solar panels, inverters, battery storage, and installation labor
- Must be a system you own (not leased)
- Unused credit rolls forward to future tax years
New Mexico Solar Market Development Tax Credit — 10%
On top of the federal credit, New Mexico offers an additional 10% state income tax credit for residential solar installations, up to $6,000.
Key facts:
- 10% of system cost, capped at $6,000
- Applied to your NM state income tax
- Can be carried forward for up to 10 years
- Must be installed on your primary or secondary residence in NM
Combined Savings Example
For a $25,000 solar installation:
- Federal ITC (30%): $7,500
- NM State Credit (10%): $2,500
- Total tax savings: $10,000
- Net cost: $15,000
That's a 40% reduction before you factor in energy savings and net metering credits.
How to Claim Your Credits
- Install your system with a qualified installer (like Epex)
- Receive IRS Form 5695 for the federal credit at tax time
- File NM PIT-CR for the state credit with your NM tax return
- Keep all receipts — installation contract, invoices, and interconnection approval
We help every customer understand their incentive options during the free consultation. Get started with a free estimate.
Frequently Asked Questions
30% of your total solar system cost with no cap. A $25,000 system gets a $7,500 credit. The rate stays at 30% through 2032, then drops to 26% in 2033.
Yes. The NM Solar Market Development Tax Credit covers 10% of system cost, up to $6,000. It's applied to your state income taxes and can be carried forward for 10 years.
Yes. The 30% federal ITC applies to battery storage systems installed with or without solar. This can reduce battery costs by $3,000–$6,000.