How Much Tax Is Deducted From a Paycheck in NM?
Demystify your New Mexico paycheck deductions. Learn what's withheld for taxes and how to adjust it for better financial control.
For New Mexico residents, paycheck deductions include federal, state, and payroll taxes. Understanding these deductions provides a clearer picture of your take-home pay, helping you plan your budget and manage financial obligations.
Understanding Paycheck Deductions
Paycheck deductions reduce an employee’s gross earnings to net pay. These primarily include Federal Income Tax, New Mexico State Income Tax, and Payroll Taxes.
Federal Income Tax funds U.S. government operations and national programs. State Income Tax supports New Mexico’s government, funding local infrastructure, education, and public services.
Payroll Taxes, known as FICA taxes, encompass Social Security and Medicare. Social Security funds retirement, disability, and survivor benefits, while Medicare provides health insurance for individuals generally aged 65 or older and certain younger people with disabilities.
Federal Income Tax Withholding
Federal income tax is withheld from gross pay using a progressive tax system, where income is taxed at increasing rates. For 2025, federal rates range from 10% to 37%.
The amount withheld depends on information from IRS Form W-4, Employee’s Withholding Certificate. Employees complete this form, indicating filing status, adjustments for multiple jobs, dependents, or other income and deductions. Employers use this W-4 data and IRS withholding tables to calculate the amount.
Pre-tax deductions, like contributions to employer-sponsored health insurance or 401(k)s, reduce taxable income, leading to less federal income tax withholding and potentially higher net take-home pay.
New Mexico State Income Tax Withholding
New Mexico uses a progressive income tax system, with rates for 2025 typically ranging from 1.50% to 5.90%. These rates apply to specific income brackets to determine state tax liability.
State income tax withholding is often based on information from the federal Form W-4. Many employers use federal W-4 data, including filing status and deductions, to calculate state withholding. While a specific New Mexico Form W-4 might exist, the federal form often serves as the primary basis.
New Mexico offers state-specific deductions and credits that can influence tax liability. For example, the 2025 standard deduction is $15,000 for single filers and $30,000 for married filing jointly. Employees should verify how their employer handles these state-specific provisions.
Social Security and Medicare Taxes
Employees contribute to Federal Insurance Contributions Act (FICA) taxes, funding Social Security and Medicare. These taxes are separate from income taxes and applied at flat rates.
The Social Security tax rate is 6.2% of gross wages, with an annual wage base limit. For 2025, this limit is $176,100, meaning earnings above this amount are not taxed.
The Medicare tax rate is 1.45% of all gross wages, with no wage base limit. A 0.9% Additional Medicare Tax applies to wages exceeding $200,000 for individual filers. Employers withhold this additional tax once wages surpass the threshold. Employers also contribute a matching amount for both Social Security and Medicare taxes, which does not come from the employee’s paycheck.
Reviewing and Adjusting Your Withholding
Reviewing your paystub helps you understand your earnings and deductions. A paystub shows gross pay, net pay, and details all deductions, including federal income tax, New Mexico state income tax, Social Security, and Medicare, often with current and year-to-date totals.
Adjusting tax withholding may be necessary due to life changes like marriage, having a child, or changing jobs. A large tax refund indicates overpaying, while owing a substantial amount suggests insufficient withholding, potentially leading to penalties. The goal is to withhold the correct amount to avoid large refunds or tax liabilities.
To adjust, obtain a new IRS Form W-4 and, if applicable, a New Mexico state withholding form. On the federal W-4, update your filing status, dependents, or additional withholding. Submit updated forms to your employer’s payroll department; changes typically take effect within one to two pay periods. The IRS Tax Withholding Estimator can help determine appropriate amounts.