New Mexico Solar Incentives & Tax Credits Guide (2026)
By Epex Team — Home Performance Experts
New Mexico Homeowners Can Save 40%+ on Solar
New Mexico solar incentives in 2026 include the 30% federal Investment Tax Credit (no cap), a 10% NM state tax credit (up to $6,000), 1:1 net metering with PNM, a 100% property tax exemption on added home value, and a ~7.5% sales tax exemption on equipment. Combined, these incentives reduce the cost of a typical residential solar installation by 40% or more. Between federal tax credits, a state tax credit, net metering, and property and sales tax exemptions, homeowners in Albuquerque and across New Mexico can reduce the cost of a solar installation by 40% or more.
Here is a summary of every major incentive available in 2026:
| Incentive | Value | Type | Status |
|---|---|---|---|
| Federal Solar ITC | 30% of system cost | Tax credit | Active through 2032 |
| NM Solar Market Development Tax Credit | 10% of cost, up to $6,000 | Tax credit | Active (first-come-first-served) |
| PNM Net Metering | 1:1 bill credit for exported energy | Utility bill savings | Active |
| Property Tax Exemption | 100% of added value exempt | Tax exemption | Permanent |
| Sales Tax Exemption | ~7.5% savings on equipment | Tax exemption | Permanent |
The rest of this guide walks through each incentive in detail, including how to claim it, what forms you need, and how the numbers add up on a real system.
Federal Solar Investment Tax Credit (ITC)
The bottom line: You can deduct 30% of your total solar system cost from your federal income taxes. There is no cap.
The Residential Clean Energy Credit — commonly called the federal ITC — is the single largest solar incentive available. It covers 30% of the total cost of your system, including panels, inverters, battery storage, wiring, labor, and permitting fees.
How the ITC works
- The credit is worth 30% of your total installed cost
- There is no upper limit — a $25,000 system gets a $7,500 credit; a $40,000 system gets $12,000
- The credit applies to systems installed and placed in service between 2022 and 2032
- After 2032, the rate steps down: 26% in 2033, 22% in 2034, and 0% for residential systems after 2034
How to claim it
- Install your solar system and get it connected to the grid
- Obtain your final invoice showing total system cost
- File IRS Form 5695 (Residential Energy Credits) with your federal tax return
- The credit amount transfers to your Form 1040 and reduces your tax liability dollar-for-dollar
Important details
- You must owe federal income taxes to use the credit. This is not a refund — it reduces what you owe.
- If your tax liability is less than the credit amount, you can carry the unused portion forward to future tax years
- You must own the system. Leased systems and power purchase agreements (PPAs) do not qualify — the leasing company claims the credit instead
- The system must be on your primary or secondary residence in the United States
For most New Mexico homeowners, the federal ITC alone covers the largest share of savings. Combined with the state credit below, the impact is substantial.
New Mexico Solar Market Development Tax Credit
The bottom line: New Mexico adds a 10% state tax credit on top of the federal credit, worth up to $6,000 — and it is refundable.
The NM Solar Market Development Tax Credit is one of the most homeowner-friendly state incentives in the country. Unlike the federal ITC, this credit is refundable, meaning you receive the full amount even if your state tax liability is less than the credit. If you owe $1,000 in state taxes and qualify for a $2,500 credit, you get a $1,500 refund.
Credit details
- 10% of total system cost, capped at $6,000
- Available for solar photovoltaic (PV) systems installed on residential property in New Mexico
- The credit is refundable — you receive the full amount regardless of your tax liability
- Can be carried forward for up to 10 years if you prefer to spread it out
How to claim it
- After your system is installed, submit an application to the New Mexico Energy, Minerals and Natural Resources Department (EMNRD) to receive a certificate of eligibility
- Receive your certificate — EMNRD processes applications on a first-come-first-served basis within annual funding limits
- Claim the credit on your NM state tax return using Form PIT-1 and Schedule CIT (Solar Market Development Income Tax Credit)
- Attach your EMNRD certificate to the return
Key considerations
- Apply early. The program has annual funding caps, and certificates are issued in the order applications are received. Do not wait until year-end.
- The system must be installed by a licensed contractor and comply with all applicable building and electrical codes
- The system must be grid-connected (off-grid systems do not qualify for this credit)
- You can claim both the NM credit and the federal ITC on the same system — they stack
Working with a qualified installer like Epex ensures your system documentation meets EMNRD requirements from the start. Contact us if you have questions about the application process.
PNM Net Metering
The bottom line: PNM credits you at the full retail rate for every kilowatt-hour your solar system sends to the grid.
Net metering is one of the most valuable ongoing financial benefits of going solar in New Mexico. Under PNM's net metering program, when your solar panels produce more electricity than your home uses, the excess is exported to the grid and you receive a 1:1 bill credit at the full retail electricity rate.
How net metering works month-to-month
- Sunny months (spring and summer): Your system likely produces more than you use. Excess generation rolls forward as a credit on your next bill.
- Winter months: Shorter days mean less production. You draw on the credits you banked during sunnier months.
- True-up period: At the end of the annual cycle (typically April), PNM settles your account. Any remaining credits are typically paid out at a lower avoided-cost rate.
Why this matters
Many states have moved away from 1:1 net metering, offering only wholesale rates (roughly one-third of retail) for exported solar energy. New Mexico's current retail-rate net metering makes solar significantly more valuable here than in states with reduced compensation.
For a typical Albuquerque household, net metering effectively reduces the annual electric bill to the minimum monthly service charge — often under $15 per month.
Eligibility
- Available to PNM residential customers with systems up to 10 kW (most residential systems qualify)
- Larger systems up to 80 kW may qualify under different rate schedules
- Your system must be interconnected with PNM and pass inspection
Property Tax Exemption
The bottom line: Solar adds value to your home, but in New Mexico, that added value is 100% exempt from property taxes.
Installing solar panels increases your home's market value. Studies consistently show that solar homes sell for a premium — typically $15,000 to $25,000 more than comparable non-solar homes. In most states, that increase would mean higher property taxes.
New Mexico is different. Under the state's solar energy property tax exemption, the added value from a solar energy system is completely exempt from property tax assessment. Your home is worth more, but your property taxes do not increase.
What you need to know
- The exemption is automatic — no application, no paperwork, no annual renewal
- It applies to the full value of the solar system for the life of the installation
- The exemption covers solar PV systems, solar thermal systems, and associated equipment
- It applies to both new construction and retrofit installations
This is a meaningful long-term benefit. On a $25,000 system in Bernalillo County, the exemption saves roughly $250 to $350 per year in property taxes that you would otherwise owe — savings that continue for the full lifespan of your system.
Sales Tax Exemption
The bottom line: Solar equipment purchases are exempt from New Mexico gross receipts tax, saving you roughly 7.5% on equipment costs.
New Mexico exempts the purchase of solar energy systems from the state gross receipts tax (the state's equivalent of sales tax). This applies to the equipment components of your system — panels, inverters, racking, and other hardware.
How the exemption works
- The exemption is applied automatically by your installer at the time of purchase — no forms to file
- Covers solar panels, inverters, racking, and related components
- The current combined gross receipts tax rate in Albuquerque is approximately 7.5%, so on a system with $25,000 in equipment costs, this exemption saves roughly $1,875
- Labor costs are generally still subject to gross receipts tax
This is a point-of-sale savings — you see the benefit immediately in your project cost, not at tax time.
Example: Total Savings on a $25,000 Solar System
Here is how all five incentives combine on a typical residential installation in Albuquerque. We will use a $25,000 system as a representative example — a common size for a 3-4 bedroom home.
Incentive breakdown
| Incentive | Calculation | Savings |
|---|---|---|
| Federal ITC (30%) | $25,000 x 0.30 | $7,500 |
| NM State Credit (10%) | $25,000 x 0.10 (capped at $6,000) | $2,500 |
| Sales Tax Exemption (~7.5%) | ~$25,000 x 0.075 | ~$1,875 |
| Total upfront savings | ~$11,875 | |
| Your net cost | $25,000 - $11,875 | ~$13,125 |
Ongoing savings
- Annual energy savings: approximately $2,000 per year (based on average Albuquerque electricity costs and a system producing ~10,000 kWh annually)
- Property tax savings: approximately $300 per year (exempt from increased assessment)
- Combined annual benefit: approximately $2,300 per year
Payback period
At $2,300 in annual savings against a net cost of $13,125, the system pays for itself in approximately 5.7 years. After that, your energy savings are essentially free for the remaining 20+ years of the system's lifespan.
Over 25 years, total savings on this system exceed $45,000 — from an upfront net investment of about $13,000.
Every home is different. System size, roof orientation, shading, and energy usage all affect the exact numbers. Get a custom savings estimate based on your home.
How to Maximize Your Incentives
These incentives are available today, but some have deadlines and funding limits. Here is how to make sure you capture the full value.
1. Go solar before the ITC steps down
The federal ITC holds at 30% through 2032, but planning and installation take time. Starting the process in 2026 gives you comfortable runway while avoiding any last-minute rush as the deadline approaches.
2. Apply for the NM state credit early
The state credit is distributed first-come-first-served within annual funding allocations. Submit your EMNRD application as soon as your system is installed and inspected. Waiting until the end of the year risks missing out on available funding.
3. Ensure your system meets all requirements
Both the federal and state credits require your system to be grid-connected, permitted, and installed by a licensed contractor. Cutting corners on permitting or using an unlicensed installer can disqualify you from credits worth thousands of dollars.
4. Work with a certified installer
A qualified installer handles permit coordination, utility interconnection, and documentation. At Epex, we provide every customer with the paperwork needed for both federal and state credit applications — including IRS Form 5695 documentation and EMNRD application support.
5. Consider adding battery storage
Battery storage systems also qualify for the federal ITC. If you are planning to add a battery in the near future, bundling it with your solar installation can maximize your 30% federal credit on the combined cost.
6. Keep your documentation
Save your installation contract, final invoice, interconnection agreement, and EMNRD certificate. You may need these if the IRS or NM Taxation & Revenue Department requests verification.
Common Questions About NM Solar Incentives
Can I claim both the federal and state tax credits on the same system?
Yes. The federal ITC and the NM Solar Market Development Tax Credit are completely independent programs. You can — and should — claim both on the same installation. Together they reduce your cost by 40% on systems up to $60,000.
What if I do not owe enough in federal taxes to use the full ITC?
The federal ITC can be carried forward to future tax years. If your federal tax liability this year is $5,000 and your credit is $7,500, you claim $5,000 this year and carry the remaining $2,500 forward to next year. The NM state credit, by contrast, is refundable — you receive the full amount regardless of your state tax liability.
Do I qualify if I lease my solar panels instead of buying them?
No. Both the federal ITC and the NM state credit require system ownership. If you lease solar panels or enter a power purchase agreement (PPA), the leasing company claims the credits. This is one reason we recommend purchasing your system — either outright or through a solar loan with $0 down.
Is there a deadline to apply for the NM state tax credit?
The program does not have a single hard deadline, but it operates on a first-come-first-served basis within annual funding allocations. Apply through EMNRD as soon as your system is installed and passes inspection. Earlier is better.
Do these incentives apply to a panel upgrade or just solar panels?
The federal ITC applies to solar energy systems, battery storage, and related electrical work that is part of the solar installation (which can include a panel upgrade if it is required for the solar system). The NM state credit applies specifically to the solar energy system. Stand-alone panel upgrades without a solar component do not qualify for solar-specific incentives.
Will net metering rates change in the future?
Net metering policies are set by the NM Public Regulation Commission (PRC) and can change over time. Currently, PNM provides 1:1 retail-rate credits for residential solar. Locking in a solar installation now means you benefit from the current favorable net metering structure. If rates are revised in the future, existing solar customers are often grandfathered under the terms in place at the time of their interconnection.
Get Your Custom Savings Estimate
Every home is different. Your savings depend on your roof, your energy usage, your tax situation, and the system size that fits your goals. The incentives outlined above are real and available today — but the specific dollar amounts will vary based on your situation.
The best next step is a free consultation. We will review your energy bills, assess your roof, and provide a detailed savings estimate showing exactly how each incentive applies to your home.
Request a free solar consultation or call us at 505-460-8795.
Frequently Asked Questions
Five major incentives: 30% federal ITC (no cap), 10% NM state tax credit (up to $6,000), PNM 1:1 net metering, 100% property tax exemption on solar value, and ~7.5% sales tax exemption on equipment.
File IRS Form 5695 (Residential Energy Credits) with your federal tax return after your system is installed and connected. The credit reduces your tax liability dollar-for-dollar. Unused portions carry forward.
The NM state credit applies specifically to solar installations. However, the 30% federal ITC does apply to battery storage systems, whether installed with solar or added later.
The 30% rate is available through 2032. It drops to 26% in 2033, 22% in 2034, and expires for residential systems after 2034.