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Are you considering solar for your home or business in New Mexico? One of the most compelling reasons to make the switch here in the Land of Enchantment is the many solar incentives available. These incentives can significantly reduce the cost of installation and ultimately increase the return on your investment. In this blog, we'll explore the various federal and local incentives that can help you harness the power of the sun while saving money and contributing to a greener future.
The New Mexico Solar Market Development Tax Credit, also known as the "New Mexico Solar Tax Credit," was enacted by the 2020 New Mexico Legislature and signed by Governor Michelle Lujan Grisham. This legislation offers a 10% tax credit, with a savings value of up to $6,000, for the purchase and installation of solar energy systems. Both businesses and homeowners are eligible for this credit. With an annual cap of $30 million, the tax credit is distributed on a first-come, first-served basis, so it's beneficial to act quickly and secure your solar incentives and savings.
One of the most significant and well-known solar incentives comes from the federal government. All 50 states are eligible for a Federal Investment Tax Credit (ITC), which helps reduce the cost of solar energy systems. Thanks to the Inflation Reduction Act (IRA), solar projects now qualify for a 30% tax credit based on the total value of your system through 2032, including parts, labor, and permitting. This tax credit steps down to 26% in 2033, 22% in 2034, and expires completely in 2035. If you choose to purchase or finance your system, you can directly benefit from this tax credit through your federal tax return.
The average savings value of the investment tax credit is around $9,000 for homeowners. Be sure to consult with a tax professional to determine if you can fully utilize this credit based on your taxable liability.
The IRA also introduced a direct pay option, allowing tax-exempt entities to receive direct payments from the IRS instead of tax credits. This helps state and local governments, nonprofits, rural electric cooperatives, schools, and tribal entities access solar energy incentives. Nonprofits, including houses of worship, libraries, and community centers, can now better afford to switch to solar energy, using the savings to further their missions and expand services to disadvantaged communities. Prior to the IRA, entities without tax liability couldn't access federal clean energy tax credits.
Great news for rural small businesses and farm workers: The USDA has announced $145 million in funding for 700 loan and grant awards through the Rural Energy for America Program (REAP) to help agricultural producers and rural small business owners make energy efficiency improvements and renewable energy investments to lower energy costs, generate new income, and strengthen the resiliency of their operations. This program is offered on a first-come, first-served basis and funding is limited. The Rural Energy for America Program can cover up to 50% of the solar system costs, which when coupled with the 30% Federal Solar Investment Tax Credit, can knock off up to 80% of the total costs to switch to clean solar energy.
Who can apply? Agricultural producers with at least 50% of gross income coming from agricultural operations and small, for-profit businesses in rural areas or non-metro communities of less than 50,000. Check out our info-slider titled “Available Grants for Rural NM Businesses & Agricultural Businesses to Save on Energy Costs” for more information on this program and its incentives.
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And those are just the initial financial perks available for going solar. Once your system is up and running, the benefits continue! New Mexico has a net metering policy that credits you for any excess electricity your system produces, allowing you to use those credits when your system doesn’t generate enough power (like roll-over minutes). PNM, Central New Mexico Electric, Mora-San Miguel, and several other local co-op utilities offer net metering programs in New Mexico.
Switching to solar in New Mexico is a smart decision for your wallet and our planet. With the multitude of federal and local incentives available, you can significantly reduce the cost of installation and maximize your return on investment. From the New Mexico Solar Tax Credit to the Federal Investment Tax Credit, Inflation Reduction Act, and Rural Energy for America Program, these opportunities make solar power more accessible and affordable than ever. Plus, with net metering policies, you'll continue to save even after your system is installed.
Don't miss out on these incredible benefits. Contact us today to learn more about how you can take advantage of these incentives and make the switch to solar. Our team is here to guide you through every step of the process, ensuring you get the most out of your investment while contributing to a greener future. Embrace the power of the sun and start saving today!