Question 1

What is New Mexico's state income tax rate for 2025?

Accepted Answer

New Mexico imposes a 6-bracket progressive income tax under NMSA §7-2-7 with TY2025 single-filer rates of 1.5% (up to $5,500), 3.2% ($5,500–$16,500), 4.3% ($16,500–$33,500), 4.7% ($33,500–$66,500), 4.9% ($66,500–$210,000), and 5.9% (above $210,000). This structure took effect January 1, 2025 under HB 252 (Laws 2024, Ch 67, Sec 5) — the first major restructuring of NM brackets since 2005, which cut the bottom rate from 1.7% to 1.5% and added a new 4.3% middle bracket.

Question 2

What is New Mexico's standard deduction for 2025?

Accepted Answer

New Mexico conforms its standard deduction to the federal amount under NMSA §7-2-2(S): $15,000 for single and MFS filers, $22,500 for HOH, and $30,000 for married-filing-jointly for TY2025. New Mexico also allows a personal exemption for taxpayers age 65 or older under NMSA §7-2-5.2 of up to $8,000, phased out based on AGI.

Question 3

Does New Mexico tax Social Security and retirement income?

Accepted Answer

New Mexico partially exempts Social Security benefits under NMSA §7-2-5.11 as enacted by HB 163 (2022): fully exempt for AGI below $100,000 single / $150,000 MFJ, phasing out above those thresholds. Armed forces retirement income is exempt up to $30,000 for TY2025 under NMSA §7-2-5.11 (SB 165, 2022, ratcheted from $10,000 in TY2022 to $30,000 in TY2024 and after).

Question 4

Do New Mexico cities or counties charge a local income tax?

Accepted Answer

No. New Mexico does not authorize its municipalities or counties to levy a local income tax. All personal income tax in New Mexico is collected at the state level under NMSA Chapter 7, Article 2. Note that New Mexico's Gross Receipts Tax (GRT) under NMSA §7-9-4, imposed on the seller at the state rate of 4.875% plus local add-ons averaging approximately 2.25%, is not an income tax — it is a business-privilege tax that is typically passed through to consumers at retail.

Question 5

What New Mexico-specific credits should filers know about for 2025?

Accepted Answer

New Mexico offers the Working Families Tax Credit under NMSA §7-2-18.15 at 25% of the federal EITC for TY2025, one of the higher percentages nationwide. New Mexico also enacted the Child Income Tax Credit under NMSA §7-2-18.34 (SB 108, 2023) of up to $600 per qualifying child (refundable, income-based sliding scale), and the Solar Market Development Tax Credit under §7-2-18.31 of 10% of installed solar-photovoltaic system cost (capped at $6,000 per system).

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