Installing solar panels won’t raise your property tax bill in New Mexico. The New Mexico solar property tax exemption, set out in NMSA 1978 Section 7-36-21.2, excludes residential solar energy system installations from the physical improvements that can push a home’s assessed value above the state’s annual valuation cap.1Justia. New Mexico Code 7-36-21.2 – Limitation on Increases in Valuation of Residential Property A $25,000 rooftop array is treated, for assessment purposes, as though it added no value at all while you own the home.
How the Exemption Works
New Mexico caps annual increases in residential property assessments. Your home’s assessed value generally cannot rise by more than 3 percent per year, or 6.1 percent over two years.1Justia. New Mexico Code 7-36-21.2 – Limitation on Increases in Valuation of Residential Property Physical improvements like a room addition or major kitchen renovation are an exception to that cap: the assessor can add their value on top in the year they’re made.
Solar installations are carved out of that exception. The assessor cannot treat a new photovoltaic system as a physical improvement that justifies pushing your assessed value beyond the ordinary annual ceiling. Install panels in June, and your next tax bill won’t jump the way it would after a garage build. The system’s value gets absorbed into the routine annual increase, and the tax impact stays negligible.
Which Solar Systems Qualify
The statute defines a “solar energy system installation” as one used to provide space heat, hot water, or electricity to the property where it’s installed. Three categories qualify:1Justia. New Mexico Code 7-36-21.2 – Limitation on Increases in Valuation of Residential Property
- Solar panels that are not also windows. Standard rooftop and ground-mounted photovoltaic arrays fit here; solar skylights and building-integrated photovoltaic windows do not.
- Dark-colored water tanks exposed to sunlight, used as passive solar water heaters.
- Non-vented trombe walls — thick, dark masonry walls behind glass that absorb solar heat during the day and release it at night.
Cooling equipment isn’t on the list. If you install a solar-powered air conditioning system, the panels themselves qualify, but cooling hardware outside these three categories may not receive the same treatment. The definition is tied to specific hardware, not to a broad “anything solar-powered” standard.
Residential Only
The exemption applies to residential property. The statute does not extend the same protection to commercial buildings, so a business installing solar on a warehouse or office should not assume the treatment carries over.2DSIRE – Database of State Incentives for Renewables and Efficiency. Property Tax Exemption for Residential Solar Systems
What Happens When You Sell
This is the limit that catches people off guard. The 3 percent annual cap does not apply after a change of ownership. When residential property sells, New Mexico law requires the assessor to revalue it at its “current and correct value” without regard to the cap.1Justia. New Mexico Code 7-36-21.2 – Limitation on Increases in Valuation of Residential Property At that reassessment, the solar system’s value can be included.2DSIRE – Database of State Incentives for Renewables and Efficiency. Property Tax Exemption for Residential Solar Systems
So the exemption benefits you for as long as you own the home. Once it changes hands, the buyer’s first assessment may reflect the full market value of the property, solar included. If you’re selling a home with panels, keep this in mind: the system adds to the sale price, but the buyer may see a higher assessed value than you were paying on. After that initial post-sale reassessment, the 3 percent cap kicks back in for the new owner, and any solar they add later is again protected from causing a valuation spike.
How to Make Sure You Get the Exemption
Because the protection is built into how the statute directs assessors to value residential property, there’s no separate application to file the way you would for a veterans’ exemption. What you should do is make sure your county assessor knows about the installation and has it categorized correctly. If the assessor’s records treat the system as a standard physical improvement, you could end up with an inflated valuation.
Contact your county assessor’s office after installation. Send documentation showing the system type, installation date, and cost. Then watch your annual notice of value. If a jump in assessed value shows up alongside or after your solar installation, point the assessor to the statutory exclusion.
If you disagree with the valuation, you can protest. Under NMSA 1978 Section 7-38-24, protests must be filed with the county assessor within 30 days of the mailing of the notice of valuation. Miss that window and you’re stuck with the assessed value for the tax year.
Leased Systems and Power Purchase Agreements
Many homeowners lease their panels or sign a power purchase agreement in which a third party owns the equipment on the roof. Section 7-36-21.2 focuses on how the county values your real property, not on who owns the hardware. Because the statute excludes solar energy system installations from the improvements that bypass the valuation cap, the property tax protection should apply whether you or a solar company holds title to the equipment.
Ownership matters for income tax credits, though. If you don’t own the system, any available tax credits belong to the solar company, not to you. That’s worth weighing when you compare buying against leasing.