Tool | November 2017

State-by-State Guide to Taxes on Retirees

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. And if you make it to 100, there's no income tax at all!

State Sales Tax

5.125% state levy. Localities can add as much as 3.56%, and the average combined rate is 7.55%, 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 income tax rate: 4.1%/individual, 4.6%/joint

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 for married filing separately, or $55,000 or less for married filing jointly or head of household.

A retirement-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.

IRAs

Qualifies for retirement-income exemption.

401(k)s and Other Defined-Contribution Employer Retirement Plans

Qualifies for retirement-income exemption.

Private Pensions

Qualifies for retirement-income exemption.

Public Pensions

Qualifies for retirement-income exemption.

Property Taxes

The median property tax on New Mexico's median home value of $158,400 is $1,197.

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.

Inheritance and Estate Taxes

There is no inheritance tax or estate tax.