New Mexico Solar Incentives & Tax Credits Guide (2026)

What's available to NM homeowners in 2026

The federal residential solar tax credit (Section 25D — often called "the ITC") ended Dec 31, 2025 for homeowner-purchased systems under the One Big Beautiful Bill Act. That changes the math, but New Mexico's state-level incentive stack is unchanged and remains one of the best in the country.

Here is a summary of every major incentive available in 2026:

The rest of this guide walks through each incentive in detail — what's still claimable, how to claim it, what forms you need, and how the numbers add up on a real 2026 install.

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Federal Solar Tax Credit — what changed in 2026

The bottom line: The 30% Section 25D Residential Clean Energy Credit ended for owned systems placed in service after Dec 31, 2025. If you want federal incentive value in 2026, the only remaining path for residential solar is a third-party-owned structure (lease or PPA) that captures the commercial Section 48E credit.

What ended

The One Big Beautiful Bill Act (P.L. 119-21), signed July 4, 2025, terminated Section 25D for property placed in service after Dec 31, 2025. This affects all residential solar systems that the homeowner purchases — whether cash, financed loan, or HELOC. Systems placed in service in 2025 can still claim the 30% credit on a 2025 tax return; 2026 installs cannot.

What's still available federally — via lease or PPA

The commercial credit (Section 48E) is still active through 2027-28. Solar developers — including reputable installers offering leases and PPAs — can claim Section 48E on third-party-owned residential systems and pass that value through to the homeowner in the form of lower monthly lease payments or lower cents-per-kWh PPA pricing.

If federal incentive value matters to your budget:

• A solar lease is a fixed monthly payment for the use of the system. The leasing company owns the panels, claims Section 48E, and prices the lease accordingly.
• A PPA (power purchase agreement) is similar in structure, but you pay a per-kWh rate for the solar electricity produced rather than a flat monthly amount.
• Cash and loan purchases no longer get federal credit value. They still benefit from every NM-level incentive below — they just don't have a federal component anymore.

Lease and PPA contracts vary substantially. Read the escalator clause (how much the payment increases per year), the buyout terms (when and at what price you can purchase the system), and the warranty/service responsibilities. We walk through these line by line on a free consultation.

Always confirm with a tax professional

OBBB is recent legislation, and IRS guidance continues to evolve. Before relying on any specific federal incentive math — whether you're buying outright, leasing, or in a PPA — confirm your situation with a licensed CPA or tax professional. Nothing in this guide is tax advice.

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New Mexico Solar Market Development Tax Credit

The bottom line: New Mexico's state-level solar tax credit is now the single largest direct incentive for homeowner-purchased systems — 10% of cost, up to $6,000, and refundable.

The NM Solar Market Development Tax Credit (SMDTC) is one of the most homeowner-friendly state incentives in the country. It's 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. With the federal Section 25D credit ended for owned systems in 2026, the SMDTC has become the primary direct tax benefit for NM homeowners who purchase their solar system outright.

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

1. 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
2. Receive your certificate — EMNRD processes applications on a first-come-first-served basis within annual funding limits
3. Claim the credit on your NM state tax return using Form PIT-1 and Schedule CIT (Solar Market Development Income Tax Credit)
4. 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)
• Leases and PPAs are not eligible for the SMDTC (the credit requires owner-occupant ownership of the system) — the system owner in those structures may take their own credits

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.

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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

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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.

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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.

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Example: Total Savings on a $25,000 Solar System (2026)

Here is how the remaining incentives combine on a typical residential cash/loan purchase in Albuquerque. We use a $25,000 system as a representative example — a common size for a 3-4 bedroom home — and assume roughly $20,000 of that cost is equipment.

Incentive breakdown — owned system in 2026

Ongoing savings

• Annual energy savings: roughly $2,000 per year (typical Albuquerque rates, system producing ~10,000 kWh annually)
• Property tax savings: roughly $300 per year (added home value exempt from assessment)
• Combined annual benefit: roughly $2,300 per year

Payback period — owned

At $2,300 in annual benefit against a net cost of $21,000, payback is approximately 9 years. After that, energy savings are essentially free for the remaining 20+ years of the system's life.

Over 25 years, total benefit exceeds $50,000 from a net upfront investment of about $21,000 — and PNM's NMPRC-approved rate increases (Phase 1 July 2025, Phase 2 April 2026, with more likely over the system's life) keep pushing that payback shorter.

How a lease or PPA changes the math

A solar lease or PPA shifts the upfront cost to roughly $0 and trades it for a monthly payment that's usually lower than the pre-solar PNM bill — the Section 48E credit captured by the system owner reduces your monthly rate. The arithmetic depends heavily on the specific contract escalator and buyout terms. We'll run the numbers honestly during your free consultation so you can compare owned vs. leased vs. PPA side by side.

Every home is different. System size, roof orientation, shading, energy usage, and tax situation all affect the exact numbers. Get a custom savings estimate based on your home.

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How to Maximize Your Incentives

The post-2025 federal landscape changes the strategy. Here's how to capture the most value in 2026.

1. Pick the right ownership structure for your situation

If your tax situation can't use federal credits anyway (low federal liability, fixed income, etc.), a cash or loan purchase still makes great sense — the NM state stack and net metering carry most of the math. If federal incentive value matters to your budget, ask about lease and PPA pricing, where the Section 48E commercial credit is captured by the system owner and passed through to you in lower payments.

2. Apply for the NM state credit early

The 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 late in the year risks missing the funding window.

3. Ensure your system meets all requirements

The NM state credit requires your system to be grid-connected, permitted by the AHJ, installed by a licensed contractor, and documented end-to-end. 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, PNM interconnection, and documentation. At Epex, we provide every customer with the paperwork needed for the NM state credit (including EMNRD application support) and — for lease and PPA customers — line-by-line clarity on how the Section 48E commercial credit is reflected in your pricing.

5. Time battery decisions thoughtfully

Battery storage is its own decision now that the federal residential credit no longer applies to either solar or batteries on owned systems. If you're going with a lease or PPA, the battery can usually be bundled into the same agreement and inherit any federal value the installer captures.

6. Keep your documentation

Save your installation contract, final invoice, interconnection agreement, and EMNRD certificate. Keep lease or PPA contracts in an organized file. NM Taxation & Revenue may request verification.

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Common Questions About NM Solar Incentives

Can I still claim a federal solar tax credit in 2026?

Not on an owned system. The Section 25D Residential Clean Energy Credit was terminated for property placed in service after Dec 31, 2025 by the One Big Beautiful Bill Act. The commercial Section 48E credit remains available through 2027-28 to third-party system owners — which is why solar leases and PPAs can still reflect federal incentive value in their pricing.

If I'm leasing or in a PPA, do I get the NM state credit?

No — the NM Solar Market Development Tax Credit also requires system ownership. The leasing company owns the system in a lease or PPA, so they would claim it (or factor it into pricing). If maximizing the NM state credit matters to you, an owned system is the path. For most homeowners the right structure depends on your overall tax picture and how long you plan to stay in the home — we're happy to model both.

Do I qualify if I lease my solar panels instead of buying them?

You don't claim incentives directly, but a well-priced lease or PPA reflects the federal Section 48E credit (and any other incentives the system owner captures) in your monthly payment. The trade-off: lower or zero upfront cost, predictable monthly payment, but reduced total lifetime savings compared to owning outright. Read the contract's escalator clause and buyout terms carefully.

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 NM Solar Market Development Tax Credit applies specifically to solar PV systems. Stand-alone panel upgrades without a solar component do not qualify for solar-specific incentives. Property and gross receipts tax exemptions are also tied to the solar system itself, not the supporting electrical work.

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 framework. Historically, when net metering policies change, existing solar customers are often grandfathered under the terms in place at the time of their interconnection — though that's a policy choice, not a guarantee.

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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.