New Mexico state tax: Overview
New Mexico has an income tax with a top rate of 5.9%, but the state waives your income taxes if you reach 100 years of age.
Property taxes in New Mexico are relatively low, and the state's gas tax is not high when compared to gas taxes in other states.
In the news: New Mexico has two constitutional amendments on the November 2024 ballot related to property tax exemptions for Veterans.
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One would extend the disabled veteran property tax exemption to all disabled veterans proportionally based on their disability rating. At the same time, the other would increase the general veteran property tax exemption and index it to inflation.
These measures could provide significant tax relief to Veterans but may also impact local government revenues.
[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. Another thing about New Mexico state tax is that it has become a more tax-friendly state for retirees over the past year.
New Mexico tax on retirement benefits: As of 2022, New Mexico does not tax most Social Security benefits. Single and married filing separately filers can make up to $100,000 without having their Social Security taxed. All other filers can make up to $150,000. Railroad Retirement benefits are fully exempt.
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.)
New Mexico sales tax
New Mexico has a 4.88% sales tax rate. Localities can add as much as 2.74%, and the average combined rate is 7.62%, 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
How is property tax in New Mexico?
New Mexico has a low average effective property tax rate of 0.67%, and average property tax bills are below the national average.
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 |
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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