Bill Richardson
Governor
Joanna Prukop
Cabinet Secretary
Reese Fullerton
Deputy Cabinet Secretary
Fernando Martinez
Division Director
Energy Conservation and
Management Division
FACT SHEET
SOLAR ENERGY, NEW MEXICO TAX CREDITS AND YOU!
Solar energy systems are good for the environment and good for your wallet. For every kilowatthour of electricity generated by solar energy instead of a coal-fired power plant, greenhouse gas
emissions are reduced by two pounds of carbon dioxide (CO2) and three-quarters of a gallon of
water is saved. An average New Mexico household powered by a solar electric photovoltaic
(PV) system would prevent the release at the power plant of 13,000 pounds of carbon dioxide to
the atmosphere and save at least 5,000 gallons of water each year. Solar thermal systems – for
water heating, space heating, and even space cooling – also benefit the environment by
offsetting heating fuel usage, like natural gas and propane.
In New Mexico, the Clean Energy State, citizens get additional tax breaks for solar energy on
top of federal tax incentives that are currently scheduled to expire at the end of 2008. The
financial benefits include:
For Residential Customers:
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The federal tax credit for a PV system that generates electricity or a solar thermal
system is 30 percent of the cost of the system capped at $2,000 for systems purchased
between January 1, 2006, and December 31, 2008. Unless Congress reenacts the
federal tax credit, it will expire at the end of 2008.
Depending on the cost of the system and the amount of the federal tax credit, New
Mexico provides additional tax credits up to $9,000, for a total of up to $11,000 when
combined with the federal tax credit. The state tax credit applies to systems purchased
between January 1, 2006, and December 31, 2015, continuing after the federal tax credit
is scheduled to expire.
If two separate systems are installed, such as PV and solar water heating, state tax
credits can be claimed for both systems, up to a total of $18,000 in state tax credits.
The sale of solar equipment to businesses that install systems became exempt from the
state Gross Receipts Tax on July 1, 2007, helping to reduce installation costs.
Residential customers with PV systems can also reduce their electricity bill through utility
company net metering programs, as the energy their PV system produces offsets their
utility usage.
The value of PV power for net metering programs is the same as the utility company’s
retail price. In Albuquerque this is about 8 cents per kilowatt-hour.
It is possible for a residence to generate more electricity than is used, causing the meter
to run backward, which means the utility provides a credit toward their future electricity
use.
Energy Conservation and Management Division
1220 South St. Francis Drive ▪ Santa Fe, New Mexico 87505
Phone (505) 476-3310 ▪ Fax (505) 476-3322 ▪ www.CleanEnergyNM.org
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Some utility companies, in order to meet state-mandated requirements for electricity
from renewable energy sources, will pay a premium, called a Renewable Energy Credit
(REC), on top of the going retail rate for electricity. For example, PNM currently pays 13
cents a kilowatt-hour for PV-generated electricity.
The cost of installing a PV system runs about $10 per watt. An average home would
need a four-kilowatt system, at about $40,000, to handle all daily needs. With federal
and state tax credits, the net cost of such a system would be reduced to about $29,000.
In new home construction or a home purchase, the cost of installing a PV system could
be amortized in the mortgage, so a family could get the mortgage interest deduction
through their federal tax return and claim the federal and state tax credits
The federal tax credit is claimed by filling out a form with the total cost of the system and
multiplying by 30 percent. Taxpayers can take up to $2,000 in a tax credit.
For details on how to calculate the state tax credit, see section 3.3.28.17 of the Solar
Market Development Tax Credit rule at this online address:
www.nmcpr.state.nm.us/NMAC/parts/title03/03.003.0028.htm
Filing for the New Mexico tax credit requires first that the solar system be certified by the
Energy, Minerals and Natural Resources Department. The certification process supports
quality assurance of solar systems and includes requirements for permitting, licensed
contractors, and code-compliant equipment. Many solar system installers will assist with
documenting the solar system operation and the certification process.
For more information on solar credits in New Mexico, call 505-476-3310 or visit
www.CleanEnergyNM.org.
For Business Customers:
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The federal tax credit for a business installing a solar PV system is 30 percent of the
cost of the entire system, with no cap, much more than the $2,000 credit for individuals.
The 30 percent federal tax credit is available through December 31, 2008.
Taxpayers who own businesses or agricultural enterprises and file an individual New
Mexico income tax return are eligible for the New Mexico solar tax credit for their
businesses. The state tax credit is available through December 31, 2015. The amount of
the tax credit is the same as that for residential taxpayers, 30 percent up to a cap of
$9,000.
As utility company customers, businesses can also take advantage of net metering.
Because businesses typically have larger buildings and facilities than homes, they have
potential for generating much more solar PV electricity than homes.