New Mexico Solar Energy Tax Credit

New Mexico, declared "The Clean Energy State" in an executive order signed by Governor Bill Richardson in April, 2004, provides a number of tax credits and incentives for individuals and businesses who invest in alternative energy sources and energy efficiency measures. One of these tax incentives is a credit for the installation of a solar system. A credit is a direct dollar-for-dollar reduction of your state income tax.

How much is the Solar System Tax Credit?

According to the Energy Conservation and Management Division (ECMD) of the New Mexico Energy, Minerals and Natural Resources Department, New Mexico taxpayers can claim the Solar Market Development Income Tax Credit for 30% of the cost of purchasing and installing a solar photovoltaic or solar thermal system in their home, up to a total credit of $9,000, taking into account both the federal and New Mexico state tax credits. If two separate systems are installed - photovoltaic and solar water heating - state tax credits can be claimed for both, for a total credit of up to $18,000.

Taxpayers who own businesses or agricultural enterprises can also claim a New Mexico state income tax credit for a solar system they install in their business. If the business is a sole proprietorship and the owner reports business income on an individual New Mexico income tax return, the tax credit is the same as that for residential customers - 30% of the cost up to a maximum combined federal and state tax credit of $9,000.

According to the New Mexico Taxation & Revenue Department, the solar tax credit is not a refundable credit; therefore it cannot be more than the total tax liability for the year. But any unused portion of the credit can be carried forward and applied against the tax liability in the future for up to ten consecutive years following the tax year in which the credit originates.

How to Claim the Credit