New Mexico Tax Guide 2025
Explore New Mexico's 2025 state tax rates for income, sales, property, retirement, and more. Learn how New Mexico compares nationwide.
Rocky Mengle
Navigating the complexities of state taxes can be daunting, but understanding New Mexico's tax landscape is essential for residents and newcomers alike.
In this guide, we'll explore key components of The Land of Enchantment's tax system, from income and sales taxes to property taxes and retirement benefits.
New Mexico state tax: Overview
New Mexico’s income tax tops out at 5.9%, but there’s a unique benefit for those who hit a major milestone. If you make it to 100 years old, the state waives your income taxes.
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Property taxes in New Mexico are on the lower side, which is a nice break for homeowners. And if you drive a lot in the Land of Enchantment, you will be glad to know the state’s gas tax is fairly modest.
New Mexico retirement taxes
Most New Mexico residents don't pay state income tax on their Social Security benefits. Taxpayers age 65 and older can deduct up to $8,000 from their taxable income, and income for residents 100 years and older is completely tax-exempt in New Mexico.
Tax on Taxable Income: Low of 1.7% (on up to $5,500 for single filers and $8,000 for joint filers) and a high of 5.9% (on more than $210,000 for single filers and $315,000 for joint filers)
- Social Security: Taxable for single filers who earn more than $100,000 per year (more than $150,00 if married filing jointly)
- Pensions: Partially taxable
- 401(k) and IRA Distributions: Partially taxable
[Data for this state tax guide was gathered from several sources including the U.S. Census Bureau, the state’s government website, the Sales Tax Handbook, and the Tax Foundation. Property taxes are cited as a rate percentage rather than the assessed value.]
New Mexico income tax
New Mexico has a graduated state individual income tax that ranges from 1.70 percent to 5.90 percent.
New Mexico ranks among Kiplinger's most tax-friendly states for retirees for 2025.
New Mexico sales tax
New Mexico has a 4.88% sales tax rate. Localities can add as much as 2.75%, and the average combined rate is 7.63%, according to the Tax Foundation.
Technically, the sales tax in New Mexico is not sales at all. It is a gross receipts tax, which means that the seller pays a portion of their revenue to the state.
Sellers typically pass these costs to the consumer.
- Groceries: Exempt
- Prescription drugs: Exempt
- Clothing: Taxable
- Motor vehicles: Exempt
How is property tax in New Mexico?
New Mexico has a low average effective property tax rate of 0.6%, and average property tax bills are below the national average.
According to the Tax Foundation.
New Mexico Property Tax Breaks for Retirees
Property Tax Freeze: Homeowners 65 or older may apply to have the tax valuation of their property frozen.
- Homeowners with disabilities may qualify for the property tax freeze before the age of 65.
- The property tax freeze may become permanent after three years.
New Mexico gas tax
Gasoline | $0.17 per gallon |
Motor Fuel | $0.21 per gallon |
Source: Sales Tax Handbook
New Mexico taxes on alcohol and tobacco
Product | Tax Amount |
|---|---|
Cigarettes | $1.66 per pack |
Other Tobacco Products | 25% of product value |
Medical Marijuana | 5% |
Recreational Marijuana | 17.13% (5.13% cannabis sales tax + 12% state excise tax) |
Source: Sales Tax Handbook
Product | Tax Amount |
|---|---|
Wine | $1.70 per gallon |
Beer | $0.41 per gallon |
Liquor | $6.06 per gallon |
Source: Sales Tax Handbook
New Mexico estate and inheritance taxes
New Mexico is one of the states with no estate or inheritance tax.
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