A lot of New Mexico homeowners have been sitting on the solar question. They heard the federal tax credit was disappearing. They watched their PNM bills climb. And now, in mid-2026, they're asking: is solar still worth it? The honest answer is yes — but the calculation looks different than it did a year ago, and knowing what's changed matters before you sign anything.

What Happened to the Federal Solar Tax Credit

Let's get the hard part out of the way first.

Solar installers across New Mexico have been grappling with a sharp contraction in the residential market following the December 31, 2025 expiration of the 30% federal tax credit — the Residential Clean Energy Credit that covered 30% of the cost of a solar system. President Trump's One Big Beautiful Bill Act, signed into law on July 4, repealed that credit for residential rooftop solar systems.

That federal incentive was worth $6,000–$9,000 for most New Mexico homeowners. It's gone now for new residential installations purchased with cash or a loan.

A Wood Mackenzie report prepared for the Solar Energy Industries Association anticipates a market contraction of 19% in 2026, though it notes that consumers will continue to purchase solar panels as equipment costs fall and energy costs rise.

The result is a moment of confusion for a lot of homeowners — and understandably so. As one New Mexico solar marketing director put it, the loss of the federal credit and the state's inability to pass an increased replacement "kind of left homeowners wondering how they could potentially go solar and what options they have available to them."

This guide is meant to answer that question plainly.

The New Mexico Incentives That Are Still Active

Here's what most homeowners are missing: New Mexico still has some of the strongest state-level solar incentives in the country. The federal headline overshadowed what's actually still on the table.

New Mexico Solar Market Development Tax Credit (SMDTC)

The New Mexico New Solar Market Development Tax Credit (NSMDTC) offers a state tax credit against New Mexico income tax for the purchase and installation of an operating solar system on residences, businesses, and agricultural enterprises. The credit provides up to 10% of the cost of purchase and installation of a solar thermal or photovoltaic system — capped at $6,000 per taxpayer per taxable year.

One important detail: this tax credit is a refundable credit, which means any amount above what you owe in tax liability will be refunded to you by the New Mexico Taxation and Revenue Department. That's more generous than most state programs.

And if you add a battery storage system, the credit improves significantly. New Mexico offers 10% of total purchase and installation costs for solar-only systems (up to $6,000 per year) and 20% of costs for solar-plus-battery-storage systems with 15+ kWh capacity (up to $12,000 per year).

One timing caveat: the SMDTC's $30 million annual allocation is first-come, first-served. Once it's claimed for the year, it's gone until the next cycle. Don't assume you can install in December and apply whenever.

Gross Receipts Tax (GRT) Exemption

New Mexico's gross receipts tax — the state's equivalent of a sales tax — does not apply to the purchase and installation of qualifying solar energy systems. Depending on your local tax jurisdiction, the GRT rate ranges from approximately 5% to 8.813%, meaning this exemption can save homeowners between $1,200 and $2,100 on a typical residential installation. The exemption applies automatically at the point of sale — your installer will not charge GRT on qualifying equipment or labor, so no extra paperwork is required on your part.

As of July 1, 2024, the Legislature expanded this exemption to also cover energy storage equipment used to store energy generated from solar or wind sources. This battery storage exemption is in effect through July 1, 2034.

Property Tax Exemption

Solar panels do not increase your property tax assessment. New Mexico law provides a 100% property tax exemption for the value added by a solar energy system. Your home's market value goes up — solar adds real resale value — but your property taxes stay the same.

According to a Zillow study, homes with solar panels sell for approximately 4.1% more than comparable homes without them. For a $300,000 home in Albuquerque or Santa Fe, that could mean over $12,000 in added value. You get that bump without the corresponding tax increase.

Net Metering

PNM and El Paso Electric are required to offer net metering. When your solar system produces more power than you use, the excess is credited to your account at the full retail electricity rate. Those credits roll over indefinitely. This is significant because some states have moved to reduce net metering benefits — New Mexico's policy is still among the most homeowner-friendly in the country.

Why Rising Utility Rates Change the Math

The federal credit is gone, but that's only half the equation. The other half is what you're paying — and will keep paying — if you stay on the grid.

Utility rates in New Mexico have been trending upward for years, but 2026 has been especially sharp. Homeowners across the state are seeing bills 15 to 20 percent higher than last year.

As one veteran Albuquerque solar retailer put it: "They understand that it's still cheaper to go solar than it is to buy their power from PNM, and they can do it at a fixed cost." That's the key insight. Solar isn't just a purchase — it's a hedge against a bill you can't control.

When you install a solar system on your home, you're locking in your energy rate. The sun doesn't send price increase notices. Your panels produce roughly the same power in year 10 as they do in year one, with minimal degradation.

What Does Solar Actually Cost in Albuquerque Right Now?

Let's talk real numbers for Albuquerque-area homeowners.

As of March 2026, the average solar panel system costs $2.91 per watt including installation in Albuquerque. For an 8.24 kW system — the average size for Albuquerque homes — this comes out to about $24,019 before any available incentives, with prices ranging from $20,416 to $27,622.

After applying New Mexico's 10% state tax credit (up to $6,000) and the GRT exemption, most homeowners can reduce that out-of-pocket cost meaningfully. Payback periods are now 2 to 4 years longer than they were with the federal credit, but are still reasonable at 6 to 10 years for most homeowners.

Over the long run, the savings picture remains strong. The average Albuquerque homeowner will save about $18,122 over 25 years by going solar — and that estimate is based on current data, without the federal credit included.

A few things that affect your specific cost:

System size — determined by your annual energy use and roof space
Roof condition and orientation — south-facing roofs with minimal shading perform best; many Albuquerque homes are ideal candidates given the city's sun exposure
Panel and inverter type — premium panels degrade more slowly and often carry longer warranties
Financing structure — cash purchase, loan, or lease each carry different long-term implications for savings and credit eligibility

Albuquerque logs approximately 2,142 hours of annual sunshine — well above the national average of 1,600 hours. That sun exposure is one of the biggest natural advantages New Mexico homeowners have that homeowners in most other states don't.

Financing Options When the Federal Credit Is Gone

Without the 30% federal credit, how you finance your system matters more than it used to.

Cash Purchase: Highest long-term savings, and you qualify for the New Mexico state tax credit. Best for homeowners who can absorb the upfront cost and want full ownership from day one.

Solar Loan: There are several ways to finance a solar panel system so you don't have to provide all the money upfront. A cash purchase provides the best long-term savings, but solar loans spread payments over time while still allowing you to own the system. Many lenders offer $0-down options where your monthly loan payment is less than your current electric bill.

Solar Lease or PPA: While the legislation repealed the residential tax credit, it did not repeal a credit for third-party ownership. Under prepaid lease arrangements, the solar company owns the system and can take advantage of the commercial tax credit, passing savings on to customers. This is a viable path for homeowners who want immediate savings without upfront cost, but you won't own the system outright or qualify for the state income tax credit.

In New Mexico, hands-on electrical work must be carried out by a person with at least a journeyman license, and a company is required to have a master electrician to bid for a solar PV installation contract. When comparing quotes, verify your installer meets these requirements.

What to Look for in a Solar Installer

The federal credit's removal has already changed the competitive landscape. According to one longtime Albuquerque solar retailer, national companies who rushed into the market selling at the lowest price are now out of business. That's actually good news for homeowners who want a company that will still be around in year 12 when a microinverter needs replacing.

When evaluating an installer, focus on:

Local track record — how long have they been operating in New Mexico specifically?
Licensing and insurance — verify electrician credentials and contractor licensing with the New Mexico Regulation and Licensing Department
Workmanship warranty — a strong installer stands behind their labor, not just the equipment
Help with the SMDTC application — helping clients apply for New Mexico incentives has become an important part of the business for solar professionals who know what they're doing
Roof assessment — a quality installer evaluates your roof's condition before committing to a design; a compromised roof can void warranties and cause problems down the road

According to a study by the National Renewable Energy Laboratory (NREL), solar quotes from national installers are about 10% higher, on average, compared to those provided by local installers — another reason to prioritize someone embedded in the Albuquerque market.

Frequently Asked Questions

Is solar worth it in New Mexico without the federal tax credit?

Yes, for most homeowners. Solar payback in New Mexico went from 4–6 years with the federal credit to 6–10 years without it — a significant change, but for homeowners planning to stay long-term, solar still delivers $21,000–$51,000 in lifetime savings on an $18,000 investment. Rising utility rates, strong net metering, and New Mexico's state-level incentives preserve the long-term case.

What is the New Mexico state solar tax credit and how do I claim it?

The New Mexico New Solar Market Development Tax Credit (NSMDTC) is a state income tax credit for the purchase and installation of a solar system. It requires certification from the Energy, Minerals and Natural Resources Department (EMNRD) before you can claim it on your state income tax return. The credit provides up to 10% of purchase and installation costs, capped at $6,000 per taxpayer per taxable year. Your installer should be able to help with the certification paperwork.

Will solar panels increase my property taxes in Albuquerque?

No. New Mexico offers a permanent property tax exemption for solar energy systems installed on residential properties. When your county assessor evaluates your home's value, the value added by a solar installation is excluded from the assessment used to calculate your property taxes — meaning solar panels can increase your home's market value without increasing your property tax bill.

Does my HOA have the right to prohibit solar panels in New Mexico?

The New Mexico Solar Rights Act and the New Mexico Solar Recordation Act state that homeowners associations cannot legally restrict the installation of solar panels. Even if your neighborhood has an active HOA, they cannot block a properly permitted installation.

How does net metering work with PNM in Albuquerque?

If you connect your solar system to the grid, you benefit from net metering. You earn credits when you send excess electricity to the grid. When the sun isn't shining and you need to pull electricity from the grid, your utility applies those credits to your bill — making it possible to owe very little, or even nothing, on your electric bills with solar panels. Regulated electric companies and investor-owned utilities in New Mexico are required to support net metering for solar systems under 10 kW.

What happens to the SMDTC if I don't owe much in state taxes?

The NSMDTC is a refundable tax credit, which means any amount above what you owe in tax liability will be refunded to you by the New Mexico Taxation and Revenue Department. This makes it useful even for homeowners with a modest tax bill.

Ready to Find Out What Solar Looks Like for Your Home?

The federal credit is gone. Utility bills are going up. New Mexico's state incentives are real, but the annual pool of funds for the SMDTC is first-come, first-served. There's no artificial urgency here — but if solar has been on your list, this is a year where waiting costs you more than it used to.

At Epex Home Performance, we assess your home's solar potential honestly — looking at your roof condition, orientation, shading, energy usage, and the incentives you actually qualify for. We handle the full installation and help you navigate the SMDTC application so you don't leave money on the table. We're a local Albuquerque team that will still be here when you need us in year 15.

Get in touch at /contact to schedule a free solar assessment. No pressure, no pitch — just a clear look at what the numbers say for your specific home.

Is Solar Still Worth It in New Mexico in 2026?