New Mexico’s tax laws aren’t very retirement-friendly. The state levies a fee on most income and purchases, with a few exemptions for residents over 100. Below, we explain various New Mexico state taxes affecting retirement income, such as sales tax, inheritance tax, and property taxes. We’ve also provided details about tax credits, exemptions, relief programs, and retirement-related tax breaks.
For information regarding taxes in other states, see Retirement Taxes by State.
New Mexico Tax Rates
|State Sales Tax||5%|
|Avg State/Local Sales Tax||7.84%|
|Gas Tax||$0.17 per gallon|
|Diesel Tax||$0.21 per gallon|
|Cigarette Tax||$2.00 per pack|
|Effective Tax Rate:||4.91%|
|Social Security Tax||Partial|
|Medical/Dental Deduction:||Federal Amount|
|Federal Income Tax Deduction:||None|
New Mexico State Taxes Explained
New Mexico Sales Tax
New Mexico’s 5.125% state levy covers most services except prescription drugs. Motor vehicles are taxable under a special 4% excise tax. Localities can add as much as 4.313%.
New Mexico Income Taxes
New Mexico’s max income tax rate is 5.9%, but residents over 100 are exempt.
New Mexico Property Taxes
New Mexico’s effective property tax rate is 0.80%. The median residential property value of $171,400 comes with a $1,371 tax bill.
The New Mexico Property Tax Rebate is available for residents age 65 and older. This rebate is for homeowners and renters with a modified gross income of $24,000 or less.
New Mexico Retirement Taxes
New Mexico taxes Social Security benefits, pensions and retirement accounts, though most seniors are eligible for a Social Security exemption: single taxpayers with less than $100,000 in income, married couples filing jointly, surviving spouses and heads of household with under $150,000 in income, and to married couples filing separately with under $75,000 in income don’t pay a tax. Taxpayers 65 years of age or older may be eligible for an income tax deduction of up to $8,000, depending on income level. Residents who are at least 100 years of age and who are not dependents of other taxpayers do not pay New Mexico personal income tax. Military pay is also taxable.
New Mexico residents aged 65 or older can take an income tax exemption of up to $3,000 for medical expenses for the taxpayer, spouse or dependents. The expenses must exceed $28,000 and be out-of-pocket expenses. An additional refundable credit of up to $2,800 for unreimbursed or uncompensated medical expenses can be combined with the exemption.
New Mexico Estate and Inheritance Taxes
There is no inheritance tax or estate tax in New Mexico.
For further information, visit the New Mexico Taxation and Revenue Department site.