New Mexico still pays a state income tax credit for home solar: 10% of the system cost, up to $6,000. It is not automatic. A state office must approve your system first, and the yearly budget is handed out first come, first served. You also pay no state sales-type tax on the system, and your utility credits the extra power your panels send to the grid.
Recently changed: the federal tax credit ended for home systems finished after December 31, 2025. The New Mexico credit is now the only tax credit for a system you buy here. New Mexico Solar for All, the planned program for lower-income homes, has been paused since August 7, 2025.
What can a New Mexico solar home collect in 2026?
Four things apply to a system you own. One is money back. Two are taxes that stay off. One is a rule for your electric bill.
Incentive | What it is worth | What you must do | The limit |
|---|---|---|---|
10% of the cost, up to $6,000. Typical system: about $1,200 | Apply to the state energy department after inspection, then claim it on your state tax return | A yearly budget of $30 million, first come, first served | |
No gross receipts tax on the system and its installation | Sign Form RPD-41341 for your installer | The installer takes the deduction, so it must show in your price | |
Solar cannot lift your home’s taxed value past the yearly limit of 3% | Nothing to file | Ends when the home is sold | |
Solar power is subtracted from your use each month | Your installer applies to your utility | Systems up to 10 kW. Extra power at month end is handled differently by each utility |
None of these is a rebate check for panels. If you rent or cannot use your roof, see community solar.
How does the New Mexico solar tax credit reach you?
Its full name is the New Solar Market Development Tax Credit. It lowers your New Mexico income tax by 10% of the equipment, materials and labor cost of your system, up to $6,000 per taxpayer per year. The law is NMSA 7-2-18.31.
Example: a system that costs $20,000 earns a credit of $2,000. The typical New Mexico system is 4.3 kW and costs $11,997, so its credit is about $1,200. You would need to spend $60,000 to reach the maximum.
The credit is refundable. That means you get the full amount even if you owe less state income tax than the credit. The Taxation and Revenue Department pays you the difference.
Two offices are involved. The Energy, Minerals and Natural Resources Department (EMNRD) checks your system and sends you a certificate of eligibility, the paper that proves your system qualifies. The Taxation and Revenue Department then accepts the credit on your state return, claimed with Form TRD-41406.
- Who qualifies: a New Mexico taxpayer who is not someone else’s dependent, and who buys and installs the system on a home they own. People who hold tribal land in leasehold qualify too.
- The deadline: apply to EMNRD by December 31 of the year after the system is installed. For a system installed in 2026, that is December 31, 2027.
- How long it runs: for systems installed through 2031.
- Married, filing separately: each spouse claims half of the credit.
- Selling the credit: the credit can be sold or transferred to another taxpayer. You report that to the Taxation and Revenue Department within 10 days on Form TRD-41417.
Watch out: The yearly budget can run out. EMNRD certifies complete applications first come, first served. Once $30 million is reached, it issues no more credits for that year. When we checked, EMNRD said it was processing applications, and it did not publish how much of the 2026 budget was left. An incomplete application does not hold your place.
Does a battery count toward the credit?
EMNRD’s program page lists a battery system together with a solar system as eligible. The law itself names only solar panels and solar water or space heating. Ask EMNRD in writing before you count battery costs in your credit.
Source: New Mexico EMNRD, New Solar Market Development Tax Credit
Get quotes that name who files your credit application
Your ZIP code starts a quote request with installers near you. Ask each one to put the filing of the state application, and its date, in writing.
- The credit goes to ownersAsk for a purchase price. A lease or a monthly power contract does not earn you the state credit.
- Free to compareRequesting quotes costs nothing, and you never have to sign.
- Your utility mattersPNM, El Paso Electric and Xcel Energy treat extra power differently. A quote should name your utility.
Which New Mexico taxes does a solar system avoid?
Two. The first depends on a form you sign. The second is applied by your county.
Gross receipts tax: sign Form RPD-41341
New Mexico has no sales tax. It has a gross receipts tax, which is charged to the business and usually passed on to the buyer in the price. Since 2007, a seller can deduct 100% of what it earns from selling and installing a solar system. The law is NMSA 7-9-112. It has no end date.
The seller may take the deduction only with your signed statement. The state form for it is Form RPD-41341. Sign it, then check that your quote and your invoice show no gross receipts tax on the system.
The state rule counts equipment that stores the energy as part of the solar system. So a battery sold and installed with your panels is covered. A battery bought on its own is not.
Watch out: The law covers a system that is sold and installed. It does not mention leased systems.
Source: New Mexico Taxation and Revenue Department, Form RPD-41341
Property tax: a limit, not a full exemption
New Mexico limits how fast the value used for your property tax can rise: 3% over one year, or 6.1% over two years. Most home improvements can push the value past that limit. Solar is the exception. Under NMSA 7-36-21.2, a solar system cannot raise your home’s value beyond the limit.
Example: the county values your home at $200,000 this year. Next year it can value it at no more than $206,000 under the one-year limit, with or without new solar panels.
There is nothing to file. The county assessor applies the limit. Check the notice of value the county sends you each year.
Watch out: The protection ends when the home changes owners. The county then sets a new value, and that value can include the solar system.
What happens to extra solar power with PNM, El Paso Electric and Xcel Energy?
Net metering means your utility subtracts the power your panels make from the power you use. In New Mexico the Public Regulation Commission, the state’s utility regulator, sets the rule (17.9.570.14 NMAC, in force since May 24, 2022). It covers home systems up to 10 kW.
Inside one billing month, the subtraction is kWh for kWh. You pay for the difference at your normal rate. The rule differs for what is left over when your panels make more than you use in a month. Each utility picks one of two methods. It can save the extra kWh for later months. Or it can pay or credit you at its energy rate, a rate based on the utility’s own cost of power, which is not the full price you pay per kWh.
Example: your panels make 700 kWh in a month and you use 600 kWh. You pay for no energy that month, and 100 kWh are extra. With PNM those kWh wait on your account for a later month.
| Your utility | What it does with the extra | Ask before you sign |
|---|---|---|
| Public Service Company of New Mexico (PNM) | Saves it as kWh credits for systems of 10 kW-AC or less. PNM says the credits never expire. When you close the account, PNM pays what is left at its energy rate. | Whether your system size keeps you at or under the limit |
| El Paso Electric | Credits it in dollars, based on its fuel and purchased power costs | The current credit per kWh, in writing. Your system may be sized to make no more than 120% of your yearly use. |
| Xcel Energy (Southwestern Public Service) | Follows the same state rule. Ask Xcel Energy for its current terms in writing. | Which of the two methods it uses, and the rate |
| Rural electric cooperatives | Follow the state rule if the commission regulates them | Which method your cooperative uses |
| City-owned utilities, such as Farmington | Set their own rules. The state rule does not apply. | The utility’s own solar rules and credit |
Your utility’s name is at the top of your electric bill. A system owned by another company, such as a leased system, can use net metering too.
Watch out: A system sized well above your own use earns little for the extra. Size it to your own yearly use.
Community solar, Solar for All and homeowner association rules
For homes that cannot put panels on the roof, and for a rule that protects those that can.
Community solar lets you subscribe to a share of a large solar project instead of owning panels. It is open to customers of PNM, Xcel Energy (Southwestern Public Service) and El Paso Electric, and only for a project in your own utility’s area. You sign up with a subscription manager listed on the state program website. Your utility then puts a credit on your bill for each kWh your share makes.
- Lower incomes: 30% of each project is reserved for low-income customers. Ask the subscription manager what its low-income offer is.
- Solar for All: paused since August 7, 2025, when the federal government moved to end the grant. There is nothing to apply for now.
- Homeowner associations and cities: under NMSA 3-18-32, a deed rule made after July 1, 1978 that in effect bans solar panels cannot be enforced. Cities and counties cannot restrict panels either, except in historic districts.
Your utility | Bill credit per kWh of your share | Rate since |
|---|---|---|
PNM | about 9.06 cents | July 1, 2026 |
Xcel Energy (Southwestern Public Service) | about 7.16 cents | August 1, 2026 |
El Paso Electric | about 6.19 cents | September 1, 2026 |
Rates as posted by the program administrator, last updated September 25, 2026. They move with each utility’s fuel and power costs.
Watch out: The credit is not your saving. Example: 100 kWh from a PNM share puts about $9.06 on your bill, but you also pay the subscription manager. Your saving is the difference. The manager must give you a disclosure form that shows both numbers before you sign. Utilities can change these credits when their fuel and power costs change, so ask the subscription manager for the rate in effect when you sign.
When a New Mexico home does not get the credit
- A company owns the panels. With a lease or a power purchase agreement (PPA), a contract where a company owns the panels on your roof and you pay it monthly, you did not buy the system. The state tax credit needs a buyer who owns the system and the property.
- You apply late or with papers missing. The deadline is December 31 of the year after installation (December 31, 2027 for a 2026 system). EMNRD starts its first come, first served review only when the application is complete.
- The year’s budget is already used. After $30 million of credits in a year, EMNRD issues no more for that year. It posts no running balance, so nobody can promise you a place.
- Nobody signed Form RPD-41341. Without your signed statement the installer cannot deduct the sale, and gross receipts tax stays in your price.
- Your power comes from a city-owned utility. Farmington and other city-owned utilities are outside the state net metering rule. The tax credit still applies, but the bill credit depends on the city’s own rules.
- Your quote subtracts a federal tax credit. That credit ended for home systems finished after December 31, 2025. A quote that still shows it is out of date.
From signed contract to state tax return: the New Mexico steps
- Before you sign: settle who files what. Ask the installer to write into the contract who prepares the EMNRD application and by what date. Sign Form RPD-41341 so no gross receipts tax is charged.You, with your installer.
- Your installer asks the utility to connect the system. This request is called an interconnection application. Net metering starts when the utility approves the system and sets up the meter.Your installer.
- The system passes its building inspection. Keep the inspection report. It must show the building authority, the permit number and the date the system passed.Your installer and the local building office.
- Apply to EMNRD for the certificate of eligibility. The application is online. Attach proof that you own the property (such as a current property tax bill), an itemized invoice for equipment, materials and labor, the inspection report, a site plan and the electrical wiring diagram. If the property has several owners, they apply together.You. Your installer supplies the documents.
- Claim the credit on your New Mexico income tax return. Use Form TRD-41406 with the certificate, for the tax year in which you bought and installed the system.You or your tax preparer.
- Read your bills and your notice of value. Check that your utility handles extra power the way it told you. Check that the county did not raise your home’s value past the limit because of solar.You.
Compare New Mexico quotes for a system you own
Enter your ZIP code to request quotes from installers in your area. Ask each one who files the state tax credit application and whether gross receipts tax is left off the price.
The form asks about your home first, then your contact details. EcoGen or its installer partners may contact you.
- Free, no-obligation quotesRequest quotes from local installers. You decide if you go ahead.
- Your home first, your details lastA few questions about your home come first. Name, email and phone only at the end.
- Take the steps list with youUse the steps on this page to check what each quote says about the credit paperwork.
More New Mexico solar guides
New Mexico solar incentive questions
Does New Mexico Have a Solar Tax Credit?
Yes. The New Solar Market Development Tax Credit is 10% of the equipment, materials and labor cost, up to $6,000 per taxpayer per year. The state energy department must certify your system before you claim it. The federal credit ended for home systems finished after December 31, 2025.
Can the New Mexico Solar Tax Credit Run Out?
Yes, for a given year. The state certifies up to $30 million of credits a year, first come, first served, and then issues no more for that year. It does not publish how much is left.
Do I Need to Owe State Income Tax to Get the Credit?
No. The credit is refundable. If it is larger than the New Mexico income tax you owe, the Taxation and Revenue Department refunds the rest.
Do Solar Panels Raise Property Taxes in New Mexico?
Not beyond the normal limit while you own the home. Your home’s value for property tax can rise by 3% over one year or 6.1% over two, and solar cannot push it past that. After a sale, the county sets a new value that can include the system.
Is There Sales Tax on Solar Panels in New Mexico?
New Mexico has a gross receipts tax, not a sales tax. A seller can deduct 100% of its receipts from selling and installing a solar system, so the tax is not charged. The seller needs your signed Form RPD-41341.
Does New Mexico Have Net Metering?
Yes, for home systems up to 10 kW with the utilities the state regulates. Solar power is subtracted from your use each month. Extra power at month end is saved as kWh credits or credited at the utility’s energy rate, depending on your utility.
Sources (12)
- New Mexico Energy, Minerals and Natural Resources Department, New Solar Market Development Tax Credit (checked September 30, 2026): clean.energy.nm.gov
- New Mexico Statutes, Chapter 7: Sections 7-2-18.31, 7-9-112 and 7-36-21.2 (checked September 29, 2026): nmonesource.com
- New Mexico Taxation and Revenue Department, Form TRD-41406, New Solar Market Development Tax Credit Claim Form (checked September 30, 2026): tax.newmexico.gov
- New Mexico Taxation and Revenue Department, Form RPD-41341, Solar Energy Systems purchase and use statement (checked September 30, 2026): tax.newmexico.gov
- New Mexico Administrative Code, 3.2.247 NMAC, solar energy systems deduction (checked September 30, 2026): srca.nm.gov
- New Mexico Taxation and Revenue Department, Gross Receipts Tax Overview (checked September 30, 2026): tax.newmexico.gov
- New Mexico Administrative Code, 17.9.570 NMAC, net metering rule of the Public Regulation Commission (checked September 30, 2026): srca.nm.gov
- New Mexico Community Solar Program, Solar Bill Credit Rates (checked September 30, 2026): csnewmexico.com
- New Mexico Community Solar Program, Find a Community Solar Provider (checked September 30, 2026): csnewmexico.com
- New Mexico Energy, Minerals and Natural Resources Department, Solar for All (checked September 30, 2026): emnrd.nm.gov
- New Mexico Statutes, Section 3-18-32, limits on solar collector restrictions (checked September 29, 2026): nmonesource.com
- IRS, Residential Clean Energy Credit (checked September 30, 2026): irs.gov
