When homeowners think of solar panel tax credits, they often think of the federal credit that makes solar energy more accessible and affordable for all Americans. Signed into law in March and in effect as of July 2020, the New Solar Market Development Income Tax Credit provides additional financial benefit for New Mexicans. The state’s solar incentives are acknowledged widely as some of the best in the country. The credits available in the Land of Enchantment come at an opportune time since the 26% Federal Investment Tax Credit (ITC) decreases at the end of 2020. As such, we’re answering a few frequently asked questions from homeowners and commercial property owners.
How much is the credit for?
This bill provides a 10% tax credit for a solar system up to a maximum of $6,000. As with the federal tax credit, the state tax credit provides money toward your income or business tax. If the amount of your credit exceeds the tax you owe for that year, the remaining credit can be rolled over to future years for up to five years.
What’s different?
The New Mexico Solar Market Development Tax Credit aka the New Mexico Solar Tax Credit outlines a new maximum credit amount. It also established an application process through the New Mexico Energy, Minerals, and Natural Resources Department.
When can New Mexicans apply?
The state began accepting applications for the tax credit on August 25, 2020.
Who’s eligible?
Homeowners or building owners who purchase and install a solar energy system on or after March 1, 2020, are eligible for the non-refundable tax credit. The credit applies to residential, commercial, and agricultural installations. Systems must be purchased or installed before January 1, 2028.
Does everyone get the credit?
The solar tax credit has an annual allotment of $8 million. It is provided on a first-come, first-served basis. So, to take best advantage of this credit, get started soon.
Are there additional financial benefits when you install solar?
Installing solar panels increases the value of residential homes and commercial properties. However, in New Mexico, that extra value is exempt from property taxes. This exemption makes it more financially feasible to install solar panels. Additionally, New Mexico offers a sales-tax exemption for the installation of solar panels. The average value of the sales tax exemption is $1,750.
What other benefits are available in the state?
Unlike some states, New Mexico has a net metering policy. That means when your system produces extra electricity, you receive a credit. When your system doesn’t generate enough power to cover your usage, for example during cloudy or stormy periods, New Mexico allows you to apply those credits. Long story short, you will receive credit for all the power your system generates.
New Mexico’s previous solar panel tax credit expired in 2016. Between 2008 and 2016, 7,700 residences took advantage of the previous tax credit to save on their solar installations.
The solar panel tax credit is part of a larger initiative in New Mexico under the 2019 Energy Transition Act, which set bold statewide standards for renewable energy and laid the groundwork to transition the state away from coal and toward green-energy solutions while providing workforce training and assistance for affected communities. ETA sets a benchmark of 50% renewable energy in the state by 2030 for its investor-owned utilities and rural electric cooperatives.
2020 Solar Tax Credit Updates in New Mexico
With 300 days of sunshine each year in New Mexico, the Land of Enchantment is a great place to have solar panels installed. The 2020 state tax credit makes it an even better place. Contact us to get started.
