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Tool | August 2013

State-by-State Guide to Taxes on Retirees

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New Mexico

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The Bottom Line
Map of New Mexico

MIXED TAX PICTURE

The Land of Enchantment does not exclude Social Security benefits from taxation, but it allows Social Security income to be included as part of an overall retirement-income exemption of up to $8,000 per person, subject to income restrictions. Personal income tax rates top out at 4.9% on taxable income over $16,000 for single filers and over $24,000 for married couples filing jointly. New Mexico has a statewide gross receipts tax, similar to a sales tax. Property tax rates vary substantially and depend on property type and location.

State Sales Tax

5.125%, in the form of a gross receipts tax. County and city taxes may add up to another 3.56%. Prescription drugs are exempt.

Income Tax Range

Low: 1.7% (on up to $5,500 of taxable income for single filers and $8,000 for joint filers)

High: 4.9% (on taxable income over $16,000 for single filers and over $24,000 for married couples filing jointly)

Social Security

Benefits are taxed. But Social Security income can be included as part of an overall retirement-income exemption of up to $8,000 per person, subject to income restrictions.

Exemptions for Other Retirement Income

The state offers a low- and middle-income exemption, with a maximum exemption of $2,500. To qualify, adjusted gross income must be $36,667 or less (for single filers), $27,500 or less (married filing separately) or $55,000 or less (married filing jointly or head of household).

An income exemption of up to $8,000 applies for people 65 and older. Single filers with an adjusted gross income under $28,500, married couples filing jointly earning less than $51,000 and married taxpayers filing separately with less than $25,500 qualify for this exemption.

New Mexico seniors 65 or older with a modified gross income of $22,000 or less may qualify for a low-income comprehensive tax rebate. Seniors with at least $28,000 in out-of-pocket medical expenses for themselves, their spouses or their dependents during the tax year may also claim a $2,800 tax credit. In addition, New Mexico seniors with $28,000 or more in out-of-pocket medical expenses may exempt up to $3,000 in income from their state income taxes.

Property Taxes

Property is subject to state and local taxes. Rates vary substantially and depend on property type and location. The statewide weighted average rates are about $26.47 per $1,000 of residential property. The valuation of a residence that did not change hands in the prior year may not increase by more than 3% annually. One-third of the property's market value is its taxable value. The taxable value may be further reduced by exemptions of $2,000 for heads of households and $4,000 for veterans. Median property tax on the state's median home value of $160,900 is $880, according to the Tax Foundation.

Tax breaks for seniors: There is a property tax rebate for seniors. Homeowners 65 and older who earn $16,000 or less are eligible for a property tax credit of up to $250 (married filing jointly) or $125 (single taxpayers). Also, in 2013, homeowners 65 or older with modified gross income of up to $23,500 (previous year's income) can apply to have the tax valuation of their property limited to its valuation in 2001 or in the year the owner turned 65. Residents of Los Alamos and Santa Fe counties who earn $24,000 or less may also qualify for a low-income property tax rebate.

Inheritance and
Estate Taxes

There is no inheritance tax or estate tax.

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