New Mexico Tax Guide 2026

Personal income tax

NMSA §7-2-7 establishes 5 brackets for single filers (5 also for MFJ with doubled thresholds): • 1.7% on first $5,500 • 3.2% from $5,500 to $11,000 • 4.7% from $11,000 to $16,000 • 4.9% from $16,000 to $210,000 • 5.9% above $210,000 MFJ brackets are exactly doubled. The 5.9% top rate was added in 2021 (HB 6) to fund education and is the highest bracket NM has had in decades. Standard deduction conforms to federal — $15,000 single / $30,000 MFJ for 2026. No state-level personal exemption (TCJA conformity). No state QBI deduction (NM does NOT conform to federal §199A). No state AMT.

Capital gains 40% deduction

NMSA §7-2-34 allows individuals to deduct from net taxable income the GREATER of: • 40% of net long-term capital gain (qualifying assets held > 12 months), OR • $1,000 (minimum) Effective rate on qualifying LTCG: 5.9% × 60% = 3.54% — modestly favorable for high-bracket investors. Short-term gains: no preference; taxed at ordinary brackets.

Gross Receipts Tax (GRT) — not a sales tax

New Mexico does not have a traditional sales tax — it has the GROSS RECEIPTS TAX (NMSA §7-9-4) imposed on the SELLER for the privilege of doing business in NM. Like Hawaii's GET, the GRT: • Applies to gross receipts from sales of tangible goods, services, leases, licenses, and (uniquely) sales of certain INTANGIBLES • Pyramids through the supply chain (B2B taxed at each level) • Is typically passed through to customers in pricing Rate structure: • State portion: 4.875% (reduced from 5.125% effective July 1, 2022 by HB 163 of 2022; further reduction triggers exist tied to revenue performance) • Local (county + municipality): 0.125%–4.4375% • Combined: ~5.5% (rural) to ~9.3% (Albuquerque, Santa Fe city) Notable locations: • Albuquerque (Bernalillo County): 7.625% combined • Santa Fe (Santa Fe County): 8.4375% • Las Cruces: 8.3125% • Roswell: 8.6875% • Farmington: 8.0625% Groceries: GRT-DEDUCTIBLE since 2005 — sellers do not collect GRT on most unprepared foods (effectively groceries are exempt from GRT). Medical services: deductible (effectively exempt). Economic nexus (NMSA §7-9-3.5): $100,000 in cumulative receipts. DESTINATION-BASED sourcing since 2021 reform — GRT collected at the rate where the buyer takes possession, not where the seller is located. This means an Albuquerque-based service provider delivering to a Santa Fe client charges Santa Fe's higher combined rate.

Social Security exemption and retirement

NMSA §7-2-5.11 provides 100% Social Security tax exemption for taxpayers with federal AGI ≤ $100,000 (single) / $150,000 (MFJ) / $75,000 (married filing separately). Before 2022 reform, NM was one of only 12 states taxing Social Security at any income level — the exemption now shields the vast majority of NM retirees. Military retirement: $30,000 exclusion (phasing up; was $10k in 2022, $20k in 2023, $30k in 2024+; under HB 102 of 2023). Pension/IRA income: partial exclusion via low-income comprehensive tax rebate; no across-the-board exclusion like Iowa. No additional state-level retirement preferences beyond the SS exemption + military exclusion.

Property tax and business considerations

Statewide average effective ~0.67%. Bernalillo County (Albuquerque): ~0.88%, Santa Fe: ~0.45% (lower because high-value properties dilute effective rate), Doña Ana (Las Cruces): ~0.74%. New Mexico uses a 33.33% assessment ratio (taxable value = market value × 1/3) and limits annual reassessment increases to 3% for owner-occupied residential. Head-of-Family exemption: $2,000 reduction in taxable value (NMSA §7-37-4). Veteran exemption: $4,000 reduction; disabled veteran full exemption. Corporate income tax: 4.8% on first $500k + 5.9% above (NMSA §7-2A-5). LLC fee: $50 + biennial $25 statement of authority (NMSA §53-19-63 framework). Apportionment: single sales factor for most industries. PTET: NM enacted PTET via HB 102 of 2022 — entity-level election at 5.9% (top); refundable credit to owners. No estate, inheritance, or gift tax (NM estate tax repealed 2010 conformity).

Worked example: Estefanía Romero, Santa Fe-based artisan jewelry maker (single, 2026)

Estefanía operates a single-member LLC selling jewelry at her Santa Fe gallery and online. Gross receipts $245,000 (Santa Fe-source). COGS $85,000. Net profit $160,000. Owns a $410,000 Santa Fe home.

Federal: SE tax + federal income tax + §199A 20% QBI (artisan jewelry production = non-SSTB, full QBI eligible). New Mexico: Federal AGI flow: $160,000 Less standard deduction: $15,000 NM taxable: $145,000 Tax (2026 brackets, single): $5,500 × 1.7% = $94 $5,500 × 3.2% = $176 $5,000 × 4.7% = $235 $129,000 × 4.9% = $6,321 Total: $6,826 Gross Receipts Tax (Santa Fe combined 8.4375%): $245,000 × 8.4375% = $20,672 — passed through to customers (built into prices) Net cost to Estefanía if absorbed: $20,672. Typical pass-through: most jewelry sales include GRT in displayed price. Property tax on $410k Santa Fe home (Santa Fe County): assessed at 1/3 × $410,000 = $136,667 × ~3.4% effective mill = ~$4,650/yr Net NM annual state burden: $6,826 income tax + property + GRT pass-through cost.

Statute references

• Personal income tax brackets (top 5.9%) — NMSA §7-2-7
• Capital gains 40% deduction — NMSA §7-2-34
• Gross Receipts Tax — NMSA §7-9-4
• GRT economic nexus — NMSA §7-9-3.5
• Social Security exemption (income-tested) — NMSA §7-2-5.11
• Head-of-Family property exemption — NMSA §7-37-4
• Corporate income tax — NMSA §7-2A-5
• PTET (HB 102 of 2022) — NMSA §7-3A-3

Related pages

• State Tax Comparison →
• Wayfair Nexus Tracker →
• Capital Gains Tax →