Categories: Tips

What You Need to Know About New Mexico Solar Tax Credits

New Mexico boasts of having many unique attractions. The Valles Caldera, for example, is a volcanic caldera spanning 13.7 miles. The Tent Rocks, also the result of volcanic eruptions, is where visitors can see cone-shaped rocks that formed six to seven million years ago.

Aside from its tourist spots, people relocate to New Mexico for its comfortable sunny weather. Plus, residents have the added benefit of tapping the sun’s energy to offset their electrical bills.

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Going solar is the best option available for two reasons. One, the prices of solar systems are going down. Second, there are attractive New Mexico solar tax credits offered by the government.

How Much Is the Tax Credit in New Mexico?

Fortunately, the reinstatement of the Solar Market Development Income Tax Credit took effect last February 2020. According to Senate Bill 29, homeowners and businesses are entitled to New Mexico solar tax credits of 10% on their purchase of solar systems, with a cap of $6,000 per project.

The bill, however, has a cap of $8 million at the state level and will expire in eight years. Therefore, now is the best time to invest in solar systems.

Are There Federal Tax Credits?

According to the federal Solar Investment Tax Credit (ITC), you can deduct 26% of your installation costs from your federal taxes until 2021. There is no cap on the value of the solar project.

According to the Solar Energy Industries Association, however, the tax credit will be declining soon. The tax credit was as high as 30% from 2016-2019. In the coming year 2021, there will be a reduction from the current 26% to 22%. From 2022 onwards, the rates will go down further to 10% for businesses. Homeowners, unfortunately, will have no tax credits starting 2022.

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Everyone interested in New Mexico solar tax credits should seriously consider installing a solar system this year.

What Are Other Incentives?

Aside from solar tax credits, there are more ways to save money by going solar.

One is by the net metering policy. In New Mexico, you’re given credits for the additional electricity that your solar system generates. The same credits will appear in your next electricity bill and will roll over as long as there are enough credits. Check for the Net Energy Metering of sites like Xcel Energy.

Second, you can earn sustainability building tax credits. As an incentive, the New Mexico state government encourages consumers to become energy-efficient. As a prerequisite for joining the program, your home needs to be certified by the U.S. Green Building Council. The basis of the credit value depends on your level of certification and the square footage of your home.

Third, there is property-assessed clean energy (PACE) financing. New Mexico state government authorized counties to certify individual banks as “solar energy improvement financing institutions.” Under this arrangement, banks give loans up to 40% of the property’s assessed value if there are improvements related to solar energy.

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With these New Mexico solar tax credits and incentives, today is the perfect time to install solar systems in your home or business. Although anyone who owns a solar energy system is qualified for solar tax credits, they should have sufficient annual tax liability to claim the full amount within the taxable year. Otherwise, the remaining credit balance rolls over.

To get details on maximizing your solar tax credits, consult a tax professional.