New Mexico has a personal income tax with rates ranging from 1.5% to 5.9%, a gross receipts tax that functions as the state’s version of sales tax, and property taxes levied at the county level. The specific rate you pay depends on the type of tax, your income level, and where in the state you live or do business.
Personal Income Tax Rates
New Mexico taxes individual income using a graduated bracket system. Following a restructuring signed into law in 2024, the state now uses six brackets instead of the previous five, with rates starting at 1.5% on the lowest taxable income and topping out at 5.9% on the highest earners. The reform was designed to deliver the largest savings to low- and middle-income households. A married couple filing jointly with $50,000 in income, for example, saves roughly $303 per year under the new structure.
These rates apply to your taxable income after deductions and exemptions. New Mexico uses federal adjusted gross income as the starting point for your state return, then applies its own modifications. If you earn income in New Mexico but live elsewhere, or vice versa, you may need to file a part-year or nonresident return.
Social Security Income Exemption
Most retirees in New Mexico pay no state income tax on their Social Security benefits. The exemption applies to single filers with total income under $100,000, married couples filing jointly (and surviving spouses and heads of household) with income under $150,000, and married couples filing separately with income under $75,000. If you fall below those thresholds, your Social Security income is fully exempt on your state return.
Gross Receipts Tax
New Mexico does not have a traditional sales tax. Instead, it imposes a gross receipts tax (GRT) on businesses for the privilege of doing business in the state. In practice, most businesses pass this cost along to customers, so it looks and feels like a sales tax on your receipt. The key difference is that GRT is technically a tax on the business, not the buyer, which affects how certain transactions and exemptions are handled.
The total GRT rate varies significantly depending on where the transaction takes place, because it combines the state base rate with additional rates imposed by the county and municipality. A purchase in Albuquerque carries a different combined rate than one in Las Cruces or Santa Fe. The New Mexico Taxation and Revenue Department publishes rate schedules and an interactive map showing the combined rate for every location in the state. If you need the exact rate for a specific address, that map is the most reliable source.
GRT applies broadly to most goods and many services, which is wider in scope than sales taxes in most other states. Some categories are exempt or subject to special deductions, including certain groceries, prescription drugs, and some medical services. Businesses operating in multiple locations across the state may need to report and remit GRT at different rates depending on where each sale takes place.
Property Tax
Property taxes in New Mexico are administered at the county level, so rates vary by location. The state caps the taxable value of residential property at one-third of its assessed value, which keeps effective tax rates relatively low compared to national averages. Your actual bill depends on the mill rates set by your county, school district, and other local taxing authorities.
New Mexico also offers a “head of family” exemption that reduces the taxable value of a primary residence by $2,000, and a veterans’ exemption that can reduce it further. Senior citizens who meet certain income requirements may qualify for a property tax freeze that locks in their valuation, preventing increases due to rising property values.
Corporate Income Tax
Businesses organized as corporations pay a separate corporate income tax on net income earned in New Mexico. The state uses a graduated corporate rate structure with rates that are generally lower than the top personal income tax rate. Pass-through entities like LLCs and S corporations are not subject to the corporate income tax directly; instead, the income flows through to the owners’ personal returns and is taxed at individual rates.
Other Taxes to Know About
New Mexico does not impose an estate tax or inheritance tax, which matters for estate planning. The state also has no gift tax. Gasoline and diesel are subject to state excise taxes that are built into the price at the pump. Cigarettes and other tobacco products carry their own excise taxes as well.
If you recently moved to New Mexico or are considering it, the combination of moderate income tax rates, no estate tax, and the Social Security exemption makes the state relatively tax-friendly for retirees. For working residents, the biggest variable is often the gross receipts tax rate in your specific city or county, since that affects everyday purchases more directly than income tax rates for most households.