What Are the State Taxes in New Mexico?

New Mexico’s tax system includes several state and local taxes affecting individuals and businesses. The state imposes a personal income tax with a progressive rate structure, various deductions, and credits. Its system also features a Gross Receipts Tax (GRT), which functions similarly to a sales tax but is levied on business revenues. Property taxes are administered locally, and businesses face obligations like corporate income and employment-related taxes.

New Mexico Personal Income Tax

An individual’s requirement to file a New Mexico personal income tax return depends on their residency status and income. A full-year resident is anyone domiciled in the state for the entire year or physically present for 185 days or more, and they are taxed on all income. Part-year residents are taxed on income earned while a resident and any income from New Mexico sources during their non-resident period. Non-residents must file if they have income from New Mexico sources and are required to file a federal return.

The state utilizes a graduated tax system, meaning income is taxed at progressively higher rates as it increases. For the 2025 tax year, the rates range from 1.7% to 5.9%. For a single individual, the first $5,500 of taxable income is taxed at 1.7%, income between $5,501 and $11,000 is taxed at 3.2%, income from $11,001 to $16,000 at 4.7%, income from $16,001 to $210,000 at 4.9%, and any income over $210,000 is taxed at the top rate of 5.9%. These brackets are adjusted based on filing status, such as married filing jointly or head of household.

New Mexico allows taxpayers to reduce their taxable income through deductions and conforms to the federal standard deduction amounts. For the 2025 tax year, the standard deduction is $15,350 for single filers, $30,700 for married couples filing jointly, and $23,050 for heads of household. Taxpayers can choose to itemize deductions on their state return if their total itemized deductions exceed their standard deduction amount.

The state also offers several tax credits to lower a filer’s tax liability directly. The Working Families Tax Credit is a refundable credit equal to 25% of the federal Earned Income Tax Credit. Another credit is the Child Tax Credit, which provides a refundable credit of up to $600 per qualifying child. Additionally, the Child Day Care Credit offers a nonrefundable credit of up to 40% of qualifying child care expenses, capped at $1,200 for families with two or more children, for those with incomes of $30,160 or less.

New Mexico Gross Receipts Tax

New Mexico levies a Gross Receipts Tax (GRT) on most businesses. Unlike a traditional sales tax imposed on the consumer, the GRT is a tax on the total revenue a business receives from selling property or performing services in the state. Although the legal incidence of the tax is on the business, it is common practice for businesses to pass the cost on to the consumer, making it appear similar to a sales tax.

The statewide GRT rate is 4.625%. However, the actual rate paid is almost always higher because counties and municipalities add their own local option increments. This results in a wide variation of total GRT rates across the state, and businesses must track and remit the correct rate based on the location where goods or services are delivered.

The GRT applies broadly to most goods and services. This includes tangible products, professional services from doctors and lawyers, construction services, and entertainment.

Despite its broad application, there are several specific exemptions from the Gross Receipts Tax. For instance, the sale of prescription drugs is exempt, as are the wages of employees. Certain services, such as those provided by nonprofit organizations or specific financial institutions, may also be exempt. Businesses are responsible for understanding which of their receipts are subject to GRT and which qualify for a deduction.

New Mexico Property Tax

Property taxes in New Mexico are a local tax, administered and collected at the county level to fund public services. The system is based on the market value of a property, which is determined by the county assessor’s office through periodic appraisals.

The calculation of a property tax bill begins with its assessed value. In New Mexico, the assessed value is set at one-third (33.3%) of the property’s current market value. For example, a home with a market value of $300,000 would have an assessed value of $100,000.

Local governmental entities, including counties and school districts, set their own tax rates, known as mill levies. A mill is equal to $1 of tax for every $1,000 of assessed value. The total mill levy for a property is the sum of the rates from all applicable local jurisdictions. The final tax liability is determined by multiplying the assessed value of the property by the total mill levy rate.

Homeowners may be eligible for certain exemptions that reduce their property’s assessed value. The Head of Household Exemption provides a $2,000 reduction in the assessed value for any homeowner who is a New Mexico resident. The Veteran’s Exemption offers a $10,000 reduction in assessed value for honorably discharged veterans or their unmarried surviving spouses.

Business-Specific Taxes in New Mexico

Businesses operating in New Mexico are subject to several other specific taxes. The New Mexico Corporate Income Tax applies to C corporations that conduct business in the state. For tax years beginning on or after January 1, 2025, this tax is calculated at a flat rate of 5.9% on the corporation’s net income that is apportioned to New Mexico.

Employers in the state must manage Withholding Tax. This requires them to withhold a portion of their employees’ wages for state income tax and remit these funds to the New Mexico Taxation and Revenue Department. The amount withheld is based on the employee’s earnings and the allowances claimed on their federal Form W-4 and state Form RPD-41334.

Businesses with employees are also required to pay Unemployment Insurance (UI) tax, a state-administered program funded by employer contributions. The tax is paid on a portion of each employee’s wages, and the rate is determined for each business based on its history of layoffs. New employers start at a standard rate, which is then adjusted annually based on their specific experience rating.

Filing and Paying New Mexico Taxes

For most individuals, the deadline for filing the personal income tax (PIT-1) return is April 15, aligning with the federal tax deadline. Businesses required to file corporate income tax returns also generally follow this deadline, though extensions can be requested. Gross Receipts Tax returns are due on the 25th day of the month following the reporting period, which can be monthly, quarterly, or semi-annually depending on the volume of business.

The primary method for filing and paying state taxes is through the New Mexico Taxation and Revenue Department’s online portal, the Taxpayer Access Point (TAP). This system allows individuals and businesses to file returns, make payments, check their account status, and correspond with the department electronically.

For those who prefer not to use the online system, tax forms can be downloaded from the department’s website and submitted by mail. Payments can be made by mailing a check or money order with a payment voucher. Some taxes can also be paid via credit card or Automated Clearing House (ACH) debit through the TAP system, which may involve a third-party processing fee.