Taxes in New Mexico: State Tax Guide 2026
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Taxes in New Mexico: State Tax Guide 2026
Tax information is for educational purposes only and does not constitute tax advice. Consult a licensed tax professional for your specific situation.
New Mexico offers a moderate tax environment with a top income tax rate of 5.90%, below-average property taxes, and a gross receipts tax (the state’s version of sales tax) that applies broadly — including to many services that other states do not tax. The state does not tax Social Security benefits and provides generous deductions for seniors. Oil and gas revenues contribute heavily to the state budget, which has reduced pressure on individual taxpayers. Recent legislative surpluses have funded enhanced credits and deductions.
New Mexico Income Tax Rates (2026)
New Mexico uses a progressive income tax with four brackets. Rates for single filers:
| Tax Rate | Taxable Income Range |
|---|---|
| 1.70% | $0 – ~$5,500 |
| 3.20% | ~$5,501 – ~$11,000 |
| 4.70% | ~$11,001 – ~$16,000 |
| 5.90% | Over ~$16,000 |
Married filing jointly: 1.70% on first ~$8,000; 3.20% on $8,001–$16,000; 4.70% on $16,001–$24,000; 5.90% over ~$24,000.
New Mexico’s standard deduction is approximately ~$13,850 for single filers and ~$27,700 for married filing jointly, generally conforming to federal amounts.
Sales Tax
New Mexico uses a Gross Receipts Tax (GRT) instead of a traditional sales tax. The tax is imposed on businesses for the privilege of doing business, though it is typically passed through to consumers.
| Component | Rate |
|---|---|
| State base rate | 5.00% |
| Average combined (state + local) | ~7.58% |
| Highest combined rate | ~9.3125% |
GRT rates vary by location. Albuquerque’s combined rate is approximately ~7.8750%, and Santa Fe’s is approximately ~8.4375%.
Broad base: New Mexico’s GRT applies to most services (legal, accounting, construction, medical, etc.) in addition to retail goods. This is broader than the sales tax in most states.
Exempt from GRT: Most groceries (exempted in 2023), prescription medications, and some medical services.
Property Tax
| Metric | Amount |
|---|---|
| Average effective rate | ~0.67% |
| National average | 0.99% |
New Mexico property taxes are well below the national average.
Assessment: Residential property is assessed at 33.33% of market value. The state imposes a yield control formula that limits the increase in the total property tax levy (not individual assessments) to 3% per year.
Head of family exemption: A ~$2,000 reduction in taxable value for heads of families.
Veterans’ exemption: Qualifying veterans receive a ~$4,000 reduction in taxable value. Disabled veterans may receive a full exemption on the first ~$100,000 of taxable value.
Example: A home with a market value of $300,000, assessed at 33.33% = ~$100,000. After the $2,000 head of family exemption, taxable value is ~$98,000. At a typical rate of ~$20 per $1,000, annual property tax is approximately ~$1,960.
Other Taxes
- Estate and inheritance tax: New Mexico does not impose a state estate tax or inheritance tax.
- Capital gains: Taxed as ordinary income at rates up to 5.90%. New Mexico offers a partial deduction for certain capital gains.
- Fuel tax: ~$0.17 per gallon — one of the lowest nationally.
- Cigarette tax: ~$2.00 per pack.
- Alcohol tax: ~$6.06 per gallon of spirits.
- Severance taxes: The state imposes several taxes on oil, gas, and mineral extraction, including the Oil and Gas Severance Tax (~3.75%), Oil and Gas Conservation Tax, and Natural Gas Processors Tax. These are a critical revenue source.
- Compensating tax: A use tax at the same rate as GRT, applied to out-of-state purchases.
- No local income taxes.
Tax Breaks and Credits
- No Social Security tax: New Mexico fully exempts Social Security benefits from state income tax (changed in 2022; previously taxed for higher-income filers).
- Senior exemption: Taxpayers 65+ with income under ~$51,000 (single) or ~$55,000 (married) can exempt up to ~$8,000 of income.
- Low-income comprehensive tax rebate (LICTR): A refundable rebate for low-income taxpayers to offset gross receipts tax burden, up to ~$450 depending on income and family size.
- Child tax credit (refundable): New Mexico enacted one of the most generous state child tax credits — up to ~$600 per qualifying child under 17 (all income levels) and additional amounts for children under 6.
- Working families tax credit: ~25% of the federal Earned Income Tax Credit (refundable).
- Military retirement exemption: Fully exempt from New Mexico income tax.
- 529 plan deduction: Up to ~$10,000 per year for contributions to any state’s 529 plan.
- Sustainable building credit: Tax credits for energy-efficient residential construction.
Key Takeaways
- New Mexico’s top income tax rate of 5.90% is moderate, and the state does not tax Social Security or military retirement
- The gross receipts tax applies to a broader base than most state sales taxes, including many services, averaging ~7.58% combined
- Property taxes are low at ~0.67%, with meaningful exemptions for veterans and heads of household
- The state’s generous child tax credit and working families tax credit provide significant relief for families
- No state estate or inheritance tax
Next Steps
- Compare New Mexico to other states at State Income Tax Comparison: All 50 States Ranked
- Understand your federal obligation with the Federal Income Tax Guide 2026
- Make sure you claim everything you can — Tax Deductions You’re Probably Missing
- Ready to file? See How to File Your Taxes Step by Step
Tax information is for educational purposes only. Consult a licensed tax professional.