Solar tax credits pay New Mexicans to go green

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By The Staff

Solar energy systems are good for the environment and good for your wallet. For every kilowatt-hour 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 7,500 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:

Residential Customers:

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 Jan. 1, 2006, and Dec. 31, 2008.

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, for systems purchased between Jan. 1, 2006, and Dec. 31, 2015. The state tax credit will continue after the federal tax credit expires.

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.

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, 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.

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:

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 Dec. 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 Dec. 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.