Tax in New Mexico: a complete guide
New Mexico ranks below the country’s average. However, this isn’t the complete picture. Though state taxes tell one part of the story, how those taxes apply to your finances can be a whole other story.
Summary
Maximum state income tax of 5.90%.
No sales tax but a Gross Receipts Tax that works in the same way.
Average property tax of less than 1%.
New Mexico income tax
New Mexico has income tax rates that are below the national average. Designed in much the same way as the federal income tax system, New Mexico has fewer tax brackets than some other states.
At 5.9 percent, the maximum income tax rate is within a percentage point of many other states' blanket income tax for all salaries. For some higher earners, that could put a huge amount of cash back in their pocket.
However, New Mexico’s state income tax brackets aren’t as relaxed as their neighboring state of Texas, where residents pay 0 percent state income tax.
What are the New Mexico state income tax brackets for 2023/2024?
| Taxable income (single income) | Taxable income (married couple) | Income tax rate |
|---|---|---|
| $0 to $5,500 | $0 to $8,000 | 1.70 percent |
| $5,500 to $11,000 | $8,000 to $16,000 | 3.20 percent |
| $11,000 to $16,000 | $16,000 to $24,000 | 4.70 percent |
| $16,000 to $210,000 | $24,000 to $315,000 | 4.90 percent |
| $210,000 or more | $315,000 or more | 5.90 percent |
New Mexico capital gains tax
Capital gains are taxed as income in New Mexico, but taxpayers can take advantage of some relief as the state offers deductions for capital gains income.
The special tax deduction on capital gains income entitles the taxpayer to deduct 40% of the gains income or $1,000 of the net capital gains, whichever is higher.
How much you pay in federal capital gains tax will depend on how long you owned the asset before selling it. Your tax liability will be calculated as either short- or long-term capital gains tax.
New Mexico sales tax
Unlike other states, New Mexico doesn’t have a sales tax per se. Instead, businesses can be charged a gross receipts tax, which goes to the state.
Sometimes gross receipts tax is itemized on a bill, but other times it is incorporated into the price of goods. Across New Mexico, the gross receipts tax rate is five percent, but cities and counties can charge on top of that. With additional gross receipts tax set by cities and counties, it can add up to more than seven percent.
However, some items are exempt from gross receipts tax. For example, food is exempt unless it is for “immediate consumption.” Prescription drugs are also exempt.
Like many other states, New Mexico has extra excise duties on cigarettes and alcohol.
| New Mexico wine tax | $1.70 per gallon | Wine vendors are responsible for paying a state excise tax of $1.70 per gallon, plus Federal excise taxes, for all wine sold in New Mexico. |
|---|---|---|
| New Mexico beer tax | $0.41 per gallon | Beer vendors are responsible for paying a state excise tax of $0.41 per gallon, plus Federal excise taxes, for all beer sold in New Mexico. |
| New Mexico liquor tax | $6.06 per gallon | Liquor vendors are responsible for paying a state excise tax of $6.06 per gallon, plus Federal excise taxes, for all liquor sold in New Mexico. |
| New Mexico cigarette tax | $2.00 per pack | "In addition to a tax of $2.00 per pack of cigarettes, there is also the Tobacco Products Tax for other tobacco products. |
| The Tobacco Products Tax adds 25 percent to the value of the tobacco product." |
New Mexico property tax
Annual property tax payments are calculated as a percentage of a property’s value. The average property tax rate in New Mexico is 0.78 percent.
New Mexico’s average property tax of less than one percent places it amongst the states with the lowest property taxes in the US.
New Mexico’s property taxes go toward local governments and schools.
New Mexico retirement tax
New Mexico taxes all retirement income, including Social Security and retirement income from a 401(k) or payments from other retirement savings schemes. However, some seniors can get a deduction on their retirement tax bill if their household income is below a certain threshold.
If you’re over 65, a single filer, and your household income is less than $28,500, you will be entitled to a deduction of $8,000. For married couples filing jointly, aged over 65, with a household income of less than $51,000, you can also get a deduction of $8,000.
New Mexico estate tax
There is no estate tax in New Mexico, and since 2005, there have been zero estate and inheritance taxes in New Mexico.
New Mexico motor tax
If you buy a car in New Mexico, you will pay a four percent sales tax.
Gas taxes in the state are lower than in many other states. Regular gasoline is taxed at just $0.17 per gallon, while diesel has a slightly higher rate of $0.21 per gallon.
The bottom line
While New Mexico imposes lower state taxes in many respects than others, the devil is in the detail.
If you’d like an expert to help unpick the details of tax policies in New Mexico or any other state, why not reach out to a financial advisor today?
A financial advisor can help you handle all your tax queries and ensure you’re not paying more tax than needed. Find your financial advisor with Unbiased.
Senior Content Writer
Rachel is a Senior Content Writer at Unbiased. She has nearly a decade of experience writing and producing content across a range of different sectors.