New Mexico Solar Panels

The New Mexico Solar Market Development Tax Credit (SMDTC) provides a state tax credit to homeowners, businesses, and agricultural enterprises who install solar energy systems on property they own or lease. This credit is worth 10% of your total system costs—including equipment, materials, and labor—up to a maximum credit of $6,000. This state incentive helps reduce the upfront cost of going solar and works independently of other incentives.

To qualify, you must own the property where the solar system is installed (or hold a leasehold on tribal lands), and your system must pass inspection by your local building code authority. You’ll need to submit an application to the New Mexico Energy, Minerals and Natural Resources Department with documentation including proof of ownership, building inspection reports, an itemized invoice, and technical specifications of your system. The credit is available for systems installed through 2031, but timing matters: you must apply by December 31st of the year following your installation. For example, if your system is installed in 2025, you must submit your application by December 31, 2026. Once approved, you’ll receive a certificate of eligibility to claim the credit when filing your state taxes.

New Mexico’s Property Tax Exemption for solar energy systems allows homeowners who install solar panels on residential rental properties to have those systems valued at zero dollars for property tax purposes. This means the solar equipment won’t increase the property’s assessed value or result in higher property taxes. The exemption applies to photovoltaic panels and related solar equipment installed on residential properties, including rental housing units.

To qualify for this exemption, the solar system must be installed on residential property and include photovoltaic panels and associated equipment. The property must be used for rental purposes as part of the owner’s business or occupation. The zero-dollar valuation applies starting with property tax assessments made on or after January 1, 2026, meaning the tax benefit begins with the 2026 tax year.

This exemption is particularly valuable for owners of rental properties, as it removes the property tax burden that would typically come with adding solar equipment to a building. While the financial benefit varies based on the size of the solar installation, a typical system for a multi-unit building could save approximately $1,200 annually in property taxes. The exemption continues to apply in the year of installation and when the property changes ownership, with subsequent years following New Mexico’s standard property assessment rules.

Net metering in New Mexico allows you to receive credit for the excess solar energy your system sends to the electric grid. When your solar panels produce more electricity than your home uses, that surplus power flows back to the grid, and your utility company credits your account. These credits then offset the cost of electricity you draw from the grid when your panels aren’t producing enough power, like at night or on cloudy days.

How net metering works depends on your utility provider. If you’re a Public Service Company of New Mexico (PNM) customer, you receive a 1:1 credit for excess energy, meaning each kilowatt-hour (kWh) you send to the grid offsets one kWh you use later. These credits roll over month to month. For El Paso Electric customers, excess energy is credited on a 1:1 basis during the month, but any surplus remaining at month’s end is credited at a lower purchased power rate (historically averaging 2-11 cents per kWh depending on the year). Xcel Energy customers also receive 1:1 credits during the month, with excess credits valued at the FPPCAC rate (typically 1-3 cents per kWh). If your Xcel credits reach $50 or more, you’ll receive a check at the end of your billing period.

Net metering is available to homeowners who install solar panels and connect to the grid through their utility company. Each utility has its own interconnection requirements and processes. There are no statewide deadlines for enrolling in net metering, though utility-specific policies may change over time. It’s important to understand that the value of excess credits varies significantly by utility—PNM offers the most favorable terms with full retail credit, while El Paso Electric and Xcel Energy credit excess generation at lower wholesale rates.