Does New Mexico Have Income Tax? Rates, Filing, and Residency

Yes, New Mexico has a personal income tax. Residents pay it on all income, and nonresidents pay it on money earned from New Mexico sources. Rates run from 1.5% to 5.9% under a six-bracket progressive system, though Social Security benefits (for most recipients) and active-duty military pay are exempt.

Current Rates and Brackets

For tax years beginning on or after January 1, 2025, New Mexico applies six graduated rates: 1.5%, 3.2%, 4.3%, 4.7%, 4.9%, and 5.9%.¹ The 4.3% tier was added by H.B. 252 in 2024, which also adjusted the thresholds for the 4.7% and 4.9% brackets. The top 5.9% rate was left alone.

For single filers, the 1.5% rate covers the first $5,500 of taxable income. The 5.9% rate kicks in on income above $210,000. For married couples filing jointly, heads of household, and surviving spouses, the 1.5% rate applies to the first $8,000 and the 5.9% rate begins at $315,000.¹ Because the brackets are wider at every level for joint filers, a married couple will generally owe less than a single person with the same total income.

Taxable income is calculated by starting from your federal adjusted gross income, making a few New Mexico-specific adjustments (adding, for example, out-of-state municipal bond interest), and then applying either the federal standard deduction or your itemized deductions.² For 2026, the federal standard deduction is $16,100 for single filers and $32,200 for married couples filing jointly.³ New Mexico uses those federal amounts rather than setting its own.

Who Has to File

You must file a New Mexico return (Form PIT-1) if you are a resident or have income from New Mexico sources, and you are required to file a federal return.⁴ For 2026, a single filer under 65 generally has to file federally once gross income tops $16,100.³

File even when you don’t owe if either applies: New Mexico tax was withheld from your wages and you want the refund, or you want to claim one of the state’s rebates or credits.⁵ The state return is due April 15.

How Residency Is Determined

New Mexico treats you as a resident if you are domiciled in the state during any part of the tax year, or if you spent 185 days or more in the state during the year.² Domicile means your permanent home, the place you intend to return to even when you’re elsewhere.

There’s one exception. If you moved out of New Mexico before year-end with genuine intent to live permanently somewhere else, and you weren’t in the state for 185 days, you’re a part-year resident for the period after you left, and taxed only on income earned while you lived in the state.²

Full-year residents owe tax on all income, wherever earned. Nonresidents owe tax only on income from New Mexico work, property, or business activity.

What New Mexico Doesn’t Tax (Or Taxes Less)

Several provisions can cut your bill sharply, and a few can wipe it out.

Social Security benefits. Starting with tax year 2022, single filers with AGI up to $100,000 and joint filers with AGI up to $150,000 pay zero state tax on Social Security. The state estimates about 86% of New Mexico seniors qualify for the full exemption.⁶

Active-duty military pay. Fully exempt. Service members file a resident return and deduct their active-duty pay using Schedule PIT-ADJ.⁵ Armed forces retirement pay also qualifies for a deduction that depends on AGI and filing status.

Low- and middle-income exemption. Up to $2,500 per qualifying exemption, available if federal AGI is at or below $36,667 (single), $55,000 (married filing jointly or head of household), or $27,500 (married filing separately).⁵

Working Families Tax Credit. If you qualify for the federal Earned Income Credit, New Mexico adds a refundable state credit worth 25% of your federal EIC.⁵ Because it’s refundable, you can receive money back even with zero state tax owed.

Low-Income Comprehensive Tax Rebate (LICTR). Available to residents with modified gross income of $36,000 or less who lived in New Mexico at least six months during the year and aren’t claimed as anyone’s dependent. The amount adjusts for inflation.⁵

Medical care credit for seniors. A $2,800 refundable credit if you or your spouse are 65 or older and paid $28,000 or more in unreimbursed medical expenses during the tax year.⁵

Credit for taxes paid to another state. Full-year residents who earn income in another state and pay tax there can claim a credit equal to the lesser of the tax paid to the other state or the New Mexico tax on that same income.⁵

Withholding From Your Paycheck

Employers doing business in New Mexico who withhold federal income tax from wages must also withhold state income tax. This covers wages paid to New Mexico residents no matter where the work is done, and wages paid to nonresidents working in the state. Employers don’t have to withhold for nonresident employees who work in New Mexico for 15 or fewer days in a calendar year, and no withholding is required if a given month’s amount for an employee would be less than one dollar.

Penalties for Filing or Paying Late

The basic penalty for late filing or late payment is 2% per month, or partial month, on the unpaid tax, capped at 20% of the total.⁷ It’s calculated as the greater of 2% per month on the unpaid balance or 2% per month on the tax shown due on a late return, so filing late with a balance owed builds up fast. Interest runs on top of the penalty. If your failure to pay came from a good-faith mistake about the law, the state cannot assess a penalty.

1
Justia. New Mexico Code 7-2-7 – Individual Income Tax Rates
2
Justia. New Mexico Code 7-2-2 – Definitions
3
IRS. IRS Releases Tax Inflation Adjustments for Tax Year 2026
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Justia. New Mexico Code 7-2-12 – Taxpayer Returns; Payment of Tax
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NM Taxation & Revenue Department. Personal Income Tax Information Overview
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Office of the Governor, State of New Mexico. Governor Marks 90th Anniversary of Social Security
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Justia. New Mexico Code 7-1-69 – Civil Penalty for Failure to Pay Tax or File Return