State-by-State Guide to Taxes on Retirees
Tool | November 2019

State-by-State Guide to Taxes on Retirees

New Mexico

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The Bottom Line
Flag of New Mexico

Mixed Tax Picture

The Land of Enchantment is not a magical place for well-off retirees. Social Security benefits, retirement accounts and pensions are all taxable. The state does offer a retirement-income exemption of up to $8,000, but you must meet certain income restrictions to qualify. Plus, the sales tax has a broad reach, hitting most services in addition to goods. On the bright side, a generous property tax credit is available to low-income seniors, and, if you make it 100 years old, income tax is waived.

State Sales Tax

5.13% state levy. Localities can add as much as 4.13%, and the average combined rate is 7.82%, according to the Tax Foundation. New Mexico’s tax is a gross receipts tax that covers most services.

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).

Effective tax rate: 3.45% for single filers, 4.6% for joint filers.

Active-duty pay for service members is exempt.

Social Security

Social Security benefits are taxed to the extent they are taxed at the federal level.

Exemptions for Other Retirement Income

Taxpayers age 65 or older can exclude up to $8,000 of income. Federal adjusted gross income cannot exceed $28,500 for single filers, $51,000 for joint filers, or $25,500 for married taxpayers filing a separate return.

In addition, taxpayers age 100 or older can exclude all income. (Since New Mexico is a community property state, married centenarians can only exclude half of community income.)

Railroad Retirement benefits are fully exempt.

Property Taxes

In New Mexico, residents pay an average of $830 in taxes per $100,000 of assessed home value.

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, low-income homeowners 65 or older can apply to have the tax valuation of their property frozen. Residents of Los Alamos and Santa Fe counties who earn $24,000 or less may also qualify for a low-income property tax rebate.

Vehicle Taxes

Motor vehicle excise tax due on purchase: 4%.

Inheritance and Estate Taxes