Bottom Line
Middle-Class Families: Tax-Friendly (Go to the Kiplinger Tax Map for Middle-Class Families)
Retirees: Mixed Tax Picture (Go to the Kiplinger Tax Map for Retirees)
From a tax perspective, there's some good news and some bad news for New Mexico residents. The state has an income tax with a top rate of 5.9%, but your income taxes are waived altogether if you can hang in there until you're 100.
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New Mexico's gross receipts (sales) tax has a broad reach, hitting most services in addition to goods. As a result, this tax can hit residents fairly hard. On the other hand, property taxes are on the low end.
New Mexico Income Taxes
New Mexico Income Tax Range
Low: 1.7% (on up to $5,500 of taxable income for single filers and $8,000 for joint filers)
High: 5.9% (on taxable income over $210,000 for single filers and over $315,000 for married couples filing jointly)
New Mexico Taxation of Social Security Benefits
Social Security benefits are taxed to the same extent they are taxed at the federal level.
New Mexico Tax Breaks 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.
New Mexico Sales Tax
5% state levy. Localities can add as much as 4.313%, and the average combined rate is 7.72%, according to the Tax Foundation. New Mexico's tax is a gross receipts tax that covers most services.
- Groceries: Exempt
- Clothing: Taxable
- Motor Vehicles: Exempt from ordinary sales tax, but taxable under special 4% excise tax
- Prescription Drugs: Exempt
New Mexico Real Property Taxes
In New Mexico, the median property tax rate is $728 per $100,000 of assessed home value.
New Mexico Property Tax Breaks for Retirees
Homeowners 65 and older who earn $16,000 or less are eligible for a property tax credit of up to $250 (or $125 for married couples filing separately). Those who live in Los Alamos or Santa Fe Counties and earn $24,000 or less may also qualify for an additional credit of up to $350 ($175 if married filing separately).
Low-income homeowners 65 or older can also apply to have the tax valuation of their property frozen if their income is $32,000 or less.
New Mexico Motor Fuel Taxes
Gasoline: 18.88¢ per gallon.
Diesel: 22.88¢ per gallon.
New Mexico Sin Taxes
Cigarettes: $1.66 per pack
Other tobacco products: 12.5% of wholesale price
Vapor products: $0.50 per cartridge for closed systems, 12.5% of wholesale price for nicotine liquid
Beer: $0.41 per gallon
Wine: $1.70 per gallon
Liquor: $6.06 per gallon
Marijuana: 12% excise tax (rate gradually increased to 18% beginning July 1, 2025)
New Mexico Estate and Inheritance Taxes
No estate or inheritance tax.
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