Spike in New Mexico solar tax credits expected. Here's how you can save.

New Mexico lawmakers passed a series of solar power tax incentives during the 2024 Legislative Session, and officials are anticipating an increase statewide in applications from those looking to save when installing solar energy devices.

Solar power is one of the fastest-growing energy sectors in the state, with 1,890 megawatts installed as of the fourth quarter of 2023, making up about 8.2 percent of New Mexico’s electricity.

Here’s how you can cash in on state incentives while installing solar power.

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How to apply for solar power tax credits in New Mexico

New Mexicans installing solar power facilities can apply for tax credits online at the Energy, Minerals and Natural Resources Department’s website.

First, an applicant must purchase and install a solar energy system and obtain documentation from the contractor.

After the system is installed and documented, applicants apply online, receive a certificate of eligibility from EMNRD, and then claim the tax credit with the Taxation and Revenue Department when filing annual taxes.

Documents required for the application include the system’s design schematic, a current property tax bill or other proof of ownership of the enterprise when the facility was installed, a certified invoice of equipment, materials and labor costs, a building code inspection report and a completed Contractors Statement of Understanding signed by the contractor who installed the system.

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How much money is available to pay for solar in New Mexico?

Individual taxpayers can claim a credit of up 10 percent of the costs to install a solar thermal or photovoltaic system up to a maximum of $6,000 per year to offset the costs.

House Bill 252, known as the 2024 tax omnibus, raised the annual cap on the total amount of credits issued each year to $30 million per tax year, starting in 2024 until 2032. The previous cap was set at $8 million when the program started in 2020 and raised to $12 million for 2023 and 2024.

As of Thursday, EMNRD reported $431,631 in tax credits were approved for projects in the 2024 tax year, with credits averaging about $3,081.

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The cap for projects built in 2023 was met as of Feb. 7.

An additional $20 million was also made available via the tax package to those whose applications were rejected after the cap was reached for years 2020 to 2023.

Applications are evaluated on a first-come-first-served basis.

The tax bill also included language making solar projects built on land within a federally-recognized Native American nations, tribes or pueblos eligible for the credits.

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Which New Mexico counties lead in solar power?

The projects in 2023 were mostly around the state’s urban centers in northern and southwest New Mexico with Bernalillo County having the most total projects installed at 5,255, records show, about 776 projects per 100,000 residents. Sandoval County had 1,607 projects approve or 1,079 per capita, followed by Santa Fe County at 1,627 projects approved, about 1,050 per capita.

To the south, Otero County led the region with 570 approved projects in 2023, records show, or 840 per 100,000 residents, followed by Sierra County with 91 projects or 786 per capita.

How many New Mexicans received tax credits? How much did they save?

Since 2020, EMNRD reported 12,000 New Mexico homeowners received solar tax credits, saving about $1,624 per year on energy costs. The projects added a total of 97 megawatts to the state’s power grid.

Rebecca Stair, director of EMNRD’s Energy, Conservation and Management Division said a rule-making process was underway to enact the changes in New Mexico tax law via the legislation, and will soon notify the public when credits for systems built before 2024 are accepted.

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“We have some groundwork to do before we can begin accepting applications based on these new provisions,” Stair said. “We are already hard at work on those changes and will let the public know when we are accepting applications for systems installed before 2024.”

How much will the solar energy tax credits cost the State of New Mexico?

The changes would cost an estimated $2 million in 2024, according to an analysis from the Legislative Finance Committee of HB 252. That would increase to $32.1 million in 2025, then dip to $18 million a year through 2028.

Adrian Hedden can be reached at 575-628-5516, achedden@currentargus.com or @AdrianHedden on the social media platform X.

This article originally appeared on Carlsbad Current-Argus: Save with tax credits when installing solar power in New Mexico