Does New Mexico Tax Social Security and Retirement Income?

Social Security is exempt up to $100,000 of federal AGI (single) or $150,000 (joint), fully taxed above

New Mexico starts from federal adjusted gross income, which includes the part of Social Security taxed on the federal return, and then allows an exemption on Schedule PIT-ADJ, line 25. If federal AGI does not exceed $100,000 for a single filer, $150,000 for a married couple filing jointly, a head of household or a surviving spouse, or $75,000 for a married person filing separately, the whole amount of Social Security in AGI is subtracted. (New Mexico Taxation and Revenue Department, 2025 Schedule PIT-ADJ instructions (Social Security exemption, exemption for persons 65 or older, armed forces retirement pay, net capital gains deduction))

The limit is a cliff, not a phase-out. The instructions give two examples: a single filer with AGI of $99,500, including $60,000 of taxable Social Security, exempts all $60,000, while a single filer with AGI of $150,000 and the same benefit exempts none of it. Nothing is prorated in between, so a household just over the line pays New Mexico tax on up to 85% of its benefits. (New Mexico Taxation and Revenue Department, 2025 Schedule PIT-ADJ instructions (Social Security exemption, exemption for persons 65 or older, armed forces retirement pay, net capital gains deduction))

The exemption began with tax year 2022. The Taxation and Revenue Department’s notice from that time gives the thresholds as $100,000 for single filers, $150,000 for joint filers, surviving spouses and heads of household, and $75,000 for married people filing separately, the same dollar amounts that are on the 2025 schedule. With the line fixed, each cost-of-living increase in benefits moves a household nearer to it. (New Mexico Taxation and Revenue Department: Social Security Income Tax Exemption)

The test is federal AGI, which counts pensions, IRA withdrawals, interest, capital gains and the taxable Social Security itself. Of the example households on this page, the single retiree ($70,500) and the couple ($136,750) are under their limits and exempt $25,500 and $46,750. The couple with the larger portfolio ($279,500) is over $150,000 and pays tax on $59,500 of benefits. Railroad Retirement Act annuities and benefits are subtracted separately on line 10. (New Mexico Taxation and Revenue Department, 2025 Schedule PIT-ADJ instructions (Social Security exemption, exemption for persons 65 or older, armed forces retirement pay, net capital gains deduction))

The federal government is a separate matter. Up to 85% of a benefit can be taxed on a federal return once other income passes fixed thresholds, wherever you live. Our taxable Social Security calculator shows how much of yours is counted.

Pensions are taxed in full, except $30,000 of military retirement pay

New Mexico has no general pension exclusion. Schedule PIT-ADJ lists every deduction and exemption from federal income, and none of its lines covers a private employer pension, a state or local government pension, or a federal civil service annuity. That income stays in New Mexico taxable income and is taxed at the ordinary rates. (New Mexico Taxation and Revenue Department, 2025 Schedule PIT-ADJ instructions (Social Security exemption, exemption for persons 65 or older, armed forces retirement pay, net capital gains deduction))

Military retirement is the exception. An armed forces retiree, or the surviving spouse of one, exempts up to $30,000 of armed forces retirement pay on PIT-ADJ, line 24. On a joint return each qualifying spouse claims a separate $30,000. An armed forces retiree is a former member who qualified by years of service or disability to leave with lifetime benefits. (New Mexico Taxation and Revenue Department, 2025 Schedule PIT-ADJ instructions (Social Security exemption, exemption for persons 65 or older, armed forces retirement pay, net capital gains deduction))

The exemption dates from a 2022 law and originally carried a sunset date. The 2024 tax package, House Bill 252, removed the sunset and extended the exemption to the surviving spouse of an armed forces retiree, at $30,000 a year. Retirement pay above $30,000 per person is taxed like any other pension. (New Mexico Legislature, House Bill 252 (2024 regular session), final version: income tax rates from 2025, net capital gain deduction, armed forces retirement pay exemption)

A bill in the 2026 session, Senate Bill 116, would have removed the $30,000 cap and widened the exemption to all uniformed services. The Legislature’s record shows it died in committee, so the cap stands for 2026. (New Mexico Legislature, Senate Bill 116 (2026 regular session), Uniformed Services Retirement Pay Tax Exemption: bill history)

IRA and 401(k) withdrawals and Roth conversions are taxed as ordinary income

Taxable distributions from traditional IRAs, 401(k), 403(b) and 457 plans are in federal AGI, and no line of Schedule PIT-ADJ removes them. They are taxed at 1.5% to 5.9% once the standard deduction and any exemptions are used up. Qualified Roth distributions are not in federal AGI and so never reach the New Mexico return. (New Mexico Taxation and Revenue Department, 2025 Schedule PIT-ADJ instructions (Social Security exemption, exemption for persons 65 or older, armed forces retirement pay, net capital gains deduction))

A Roth conversion is taxed in the year it is made, because its taxable amount is part of federal AGI on PIT-1, line 9. The conversion also counts toward the $100,000 or $150,000 Social Security limit and toward the income tables for the age-65 and low- and middle-income exemptions, all of which are read from line 9. (New Mexico Taxation and Revenue Department, 2025 Form PIT-1 Personal Income Tax Return instructions (residency, community property, lines 9 to 17, low- and middle-income exemption worksheet))

A person who is 100 or older, and is not claimed as a dependent by someone else, exempts all income on PIT-ADJ, line 12. For a married centenarian the exemption covers half of the couple’s community income plus the centenarian’s separate income. It cannot be combined with the age-65 exemption. (New Mexico Taxation and Revenue Department, 2025 Schedule PIT-ADJ instructions (Social Security exemption, exemption for persons 65 or older, armed forces retirement pay, net capital gains deduction))

To size a conversion against federal brackets and Medicare surcharges, see the Roth conversion calculator; for required withdrawals, the RMD calculator.

Interest and dividends are taxed at ordinary rates; up to $2,500 of long-term gain is deductible

Interest, dividends and capital gains come into New Mexico income through federal AGI and are taxed on the same schedule as a pension. The net capital gains deduction on PIT-ADJ, line 16, is the greater of 100% of net capital gain up to $2,500, or 40% of up to $1,000,000 of net capital gain from the sale of a business allocated or apportioned to New Mexico. Net capital gain means net long-term gain less short-term loss, so short-term gains and dividends do not qualify. (New Mexico Taxation and Revenue Department, 2025 Schedule PIT-ADJ instructions (Social Security exemption, exemption for persons 65 or older, armed forces retirement pay, net capital gains deduction))

House Bill 252 of 2024 wrote the deduction in its present form: the greater of net capital gain up to $2,500, or 40% of up to $1,000,000 of net capital gain from the sale of a business. Nothing in it gives a percentage deduction for other gains, so a retiree selling appreciated securities or a second home deducts $2,500 at most. Married people filing separately each take half. (New Mexico Legislature, House Bill 252 (2024 regular session), final version: income tax rates from 2025, net capital gain deduction, armed forces retirement pay exemption)

Interest on U.S. savings bonds, Treasury bills and notes is deducted on PIT-ADJ, line 9, and so is the matching share of a mutual fund’s dividends when the fund reports it. Ginnie Mae, Fannie Mae and Freddie Mac interest is not deductible. Interest and dividends on New Mexico state and local bonds are deducted on line 7, and interest on other states’ bonds, tax-free federally, is added back on line 1. (New Mexico Taxation and Revenue Department, 2025 Schedule PIT-ADJ instructions (Social Security exemption, exemption for persons 65 or older, armed forces retirement pay, net capital gains deduction))

Single filers pay 1.5% on the first $5,500 of taxable income, 3.2% to $16,500, 4.3% to $33,500, 4.7% to $66,500, 4.9% to $210,000 and 5.9% above. For joint filers, heads of household and surviving spouses the brackets end at $8,000, $25,000, $50,000, $100,000 and $315,000. The schedule was enacted in 2024 and took effect for taxable years beginning on or after January 1, 2025. (New Mexico Legislature, House Bill 252 (2024 regular session), final version: income tax rates from 2025, net capital gain deduction, armed forces retirement pay exemption)

The 2026 return forms had not been published on the review date. The Department’s withholding tables for wages paid on or after January 1, 2026 use the same six rates and the same bracket widths: for a single person 1.5% on the first $5,500 above the zero-tax amount, through to 5.9% on the excess over $210,000 above it. (New Mexico Taxation and Revenue Department, FYI-104 New Mexico Withholding Tax, effective January 1, 2026 (Rev. 11/2025))

On the return, taxable income of $100,000 or less is looked up in a tax rate table built in $100 bands, and taxable income above $100,000 uses a short schedule: for joint filers $4,087 plus 4.9% of the excess over $100,000 up to $315,000, then $14,622 plus 5.9% of the excess over $315,000. The example households on this page are priced that way, from the 2025 tables, so a figure can differ by a dollar or two from the bracket arithmetic. (New Mexico Taxation and Revenue Department, 2025 PIT-TRT Tax Rate Tables)

New Mexico has no standard deduction of its own. PIT-1, line 12, takes the standard deduction allowed on the federal return (Form 1040, line 12) or the federal itemized deductions, with part of the state and local tax deduction added back on line 10 for itemizers. The 2025 PIT-1 and PIT-ADJ have no line for the separate federal deduction for people 65 or older that Congress created in 2025, so that deduction does not reduce New Mexico taxable income on the 2025 return. (New Mexico Taxation and Revenue Department, 2025 Form PIT-1 Personal Income Tax Return instructions (residency, community property, lines 9 to 17, low- and middle-income exemption worksheet))

For 2026 the federal standard deduction is $16,100 for single filers and $32,200 for married couples filing jointly, plus $2,050 for an unmarried person 65 or older or $1,650 for each married spouse 65 or older. A single 68-year-old therefore subtracts $18,150 on the New Mexico return and a couple who are both over 65 subtract $35,500. (Internal Revenue Service, Revenue Procedure 2025-32 (2026 standard deduction and additional amounts))

The examples treat the household figure for long-term gains and qualified dividends as containing at least $2,500 of long-term gain, so the two couples take the full $2,500 net capital gains deduction. A household whose $10,000 was all qualified dividends would have $2,500 more taxable income. (New Mexico Taxation and Revenue Department, 2025 Schedule PIT-ADJ instructions (Social Security exemption, exemption for persons 65 or older, armed forces retirement pay, net capital gains deduction))

Exemption for people 65 or older or blind (PIT-ADJ, line 13): $8,000 for each qualifying person when federal AGI is $30,000 or less on a joint return or $18,000 or less for a single filer. It falls by $1,000 for each $3,000 (joint) or $1,500 (single) of AGI above that and is zero above $51,000 (joint), $28,500 (single) or $25,500 (married filing separately). (New Mexico Taxation and Revenue Department, 2025 Schedule PIT-ADJ instructions (Social Security exemption, exemption for persons 65 or older, armed forces retirement pay, net capital gains deduction))

Low- and middle-income exemption (PIT-1, line 14): up to $2,500 for each person on the return, at any age. The full amount applies up to $20,000 of federal AGI (single) or $30,000 (joint); it shrinks by 15 cents (single) or 10 cents (joint) per dollar above that and ends at $36,667 (single) or $55,000 (joint). (New Mexico Taxation and Revenue Department, 2025 Form PIT-1 Personal Income Tax Return instructions (residency, community property, lines 9 to 17, low- and middle-income exemption worksheet))

Social Security exemption (PIT-ADJ, line 25): all benefits in federal AGI, provided AGI is not over $100,000 (single), $150,000 (joint) or $75,000 (married filing separately). Armed forces retirement pay (line 24): up to $30,000 per retiree or surviving spouse, with no income limit. (New Mexico Taxation and Revenue Department, 2025 Schedule PIT-ADJ instructions (Social Security exemption, exemption for persons 65 or older, armed forces retirement pay, net capital gains deduction))

Medical care for people 65 or older: a household in which either spouse is 65 or older and which paid $28,000 or more of unreimbursed medical care expenses in the year claims a $3,000 exemption on PIT-ADJ, line 18, and a refundable credit of $2,800 on Schedule PIT-RC, line 23. Figures are from the 2025 return. (New Mexico Taxation and Revenue Department, 2025 Schedule PIT-RC Rebate and Credit Schedule instructions (property tax rebate for persons 65 or older, medical care credit))

The same three households appear on every state page, so the figures can be compared across states. Each is a full-year resident taking the standard deduction, with no dependents. The figures are state income tax only: any county, city or school district income tax is described on this page but not added in. Pension income is from a private employer, and IRA figures are taxable withdrawals from traditional accounts. The state tax is our calculation from New Mexico's published 2026 rules; it is an illustration, not a return.

These households also owe federal income tax, which is the same wherever they live. The tax bracket calculator and the guide to taxes in retirement cover that side.

Property tax is collected by New Mexico’s counties. As a comparative figure, the Tax Foundation’s 2026 report, using 2024 Census data, puts the effective rate on owner-occupied homes at 0.63% of value, 34th among the states. On a $500,000 home that is about $3,150 a year. (Tax Foundation, Property Taxes by State and County, 2026 (comparative figures from Census ACS data))

For qualifying residential property, state law limits the annual increase in assessed value to 3% of the prior year’s value, whatever the market does. A change of ownership, significant improvements or a change in classification brings a reassessment at current market value, after which the cap can apply again. Tax is charged on taxable value, which is one-third of the assessor’s value, less any exemptions. (Santa Fe County Assessor, 2026 Help Guide (3% limit on valuation increases, taxable value, exemptions))

Two exemptions come off taxable value. The head-of-family exemption is $2,000 and is available to most resident homeowners. The veteran exemption is a maximum of $10,000 and requires a certificate of eligibility from the New Mexico Department of Veterans Services. Claims are filed with the county assessor within 30 days of the mailing of the notice of value. (Los Alamos County Assessor: Notices of Value and Exemptions (head-of-family and veteran exemptions))

Voters approved constitutional amendments on veterans’ exemptions at the November 5, 2024 general election, and House Bill 47 of 2025 wrote them into the Property Tax Code. The veteran exemption rose from $4,000 to $10,000 for tax year 2025 and is adjusted for inflation from tax year 2026, rounded down to the nearest $100. A disabled veteran’s principal residence is exempt in proportion to the federal disability rating. (New Mexico Legislature, House Bill 47 (2025 regular session), final version: veteran and disabled veteran property tax exemptions)

Two income tax rebates return property tax to people with low incomes. The statewide one, for residents 65 or older, is described below. Separately, a county may adopt by ordinance a property tax rebate for low-income residents with modified gross income of $24,000 or less, set as a percentage of the property tax on the principal residence; the Department lists Los Alamos, Santa Fe and Doña Ana counties as having one. (New Mexico Taxation and Revenue Department: Property Tax Rebate for Personal Income Tax (county low-income rebate, Section 7-2-14.3 NMSA 1978))

New Mexico has a gross receipts tax in place of a sales tax. It is imposed on businesses, which usually pass it to the buyer and must then state it separately on the invoice. Gross receipts include receipts from performing services in New Mexico as well as from selling goods, so repairs, personal services and professional fees are within the tax. No deduction is allowed for business expenses. Since July 1, 2025 rates change only in July, apart from special situations such as natural disasters. (New Mexico Taxation and Revenue Department: Gross Receipts Tax Overview)

The state rate is 4.875%. Counties and municipalities add their own increments, and the Department’s overview for July 2025 through June 2026 gives the range of total rates across the state as 4.875% to 10.8125%. The total paid to the state is a combination of the state, county and municipal rates for the location, and the state keeps its portion and distributes the rest. (New Mexico Taxation and Revenue Department, FYI-105 Gross Receipts and Compensating Taxes: An Overview, July 1, 2025 to June 30, 2026)

Qualifying food sold by retail food stores is deductible, so groceries are in practice untaxed; alcohol, tobacco and hot prepared food are not. Prescription drugs and oxygen are deductible too. Health care practitioners deduct receipts from Medicare and from managed care and commercial insurers, and, from July 1, 2023 until July 1, 2028, the copayments and deductibles patients pay under those plans. (New Mexico Taxation and Revenue Department, FYI-105 Gross Receipts and Compensating Taxes: An Overview, July 1, 2025 to June 30, 2026)

As a comparative figure, the Tax Foundation puts the average local rate at 2.79% and the combined state and average local rate at 7.67% as of January 1, 2026, 17th-highest among the states. (Tax Foundation, State and Local Sales Tax Rates, 2026 (comparative figures))

New Mexico collects no estate tax and no inheritance tax. The Department states that the state’s estate tax is phased out due to federal tax law changes as of January 1, 2005, and that New Mexico does not impose an inheritance tax. Only the federal estate tax can apply to a New Mexico resident’s estate. (New Mexico Taxation and Revenue Department: Estate, Trust, and Fiduciary Income Tax)

An estate or trust that earns income after the death is a separate taxpayer and files a fiduciary income tax return; beneficiaries report their share of that income on their own PIT-1. (New Mexico Taxation and Revenue Department, 2025 Form PIT-1 Personal Income Tax Return instructions (residency, community property, lines 9 to 17, low- and middle-income exemption worksheet))

New Mexico is a community property state. Unless property is separate, all assets and liabilities acquired during a marriage belong to both spouses, and when spouses file separately each reports half of the community income plus the income from their own separate property. (New Mexico Taxation and Revenue Department, 2025 Form PIT-1 Personal Income Tax Return instructions (residency, community property, lines 9 to 17, low- and middle-income exemption worksheet))

The federal estate tax applies in every state. The estate tax calculator estimates both the federal tax and any state tax.

House Bill 252 of 2024 is the last change to the rate schedule. From tax year 2025 it set six brackets from 1.5% to 5.9%, limited the general capital gains deduction to $2,500, and made the $30,000 military retirement exemption permanent. (New Mexico Legislature, House Bill 252 (2024 regular session), final version: income tax rates from 2025, net capital gain deduction, armed forces retirement pay exemption)

Senate Bill 156 in the 2026 session would have removed the income cap on the Social Security exemption for tax years from 2026. The Legislature’s record shows it died in committee, so the $100,000 and $150,000 limits remain. (New Mexico Legislature, Senate Bill 156 (2026 regular session), Social Security Income Tax Cap: bill history)

The 2026 tax package, Senate Bill 151, was signed on March 11, 2026. The Governor’s summary lists physician income tax credits, an extension of the high-wage jobs credit, a gross receipts deduction for affordable multifamily housing construction, credits for local news employers and corporate income tax decoupling. It lists no change to personal income tax rates or to the treatment of retirement income. (Office of the Governor of New Mexico: Governor signs state budget, capital outlay bills and tax package (March 11, 2026))

The veteran property tax exemption is indexed from tax year 2026. The Department calculates the new amount from the consumer price index each year and gives it to county assessors by December 1 of the prior year. (New Mexico Legislature, House Bill 47 (2025 regular session), final version: veteran and disabled veteran property tax exemptions)

The gross receipts deduction for copayments and deductibles paid to health care practitioners is temporary: it applies to receipts from July 1, 2023 and before July 1, 2028. (New Mexico Taxation and Revenue Department, FYI-105 Gross Receipts and Compensating Taxes: An Overview, July 1, 2025 to June 30, 2026)

A person is a New Mexico resident for income tax if domiciled in the state for the whole year, or physically present for 185 days or more during the year wherever domiciled. A day counts only if the person was in the state for the full 24 hours, and the 185 days need not be consecutive. Domicile is the permanent home a person intends to return to, and it does not change until the old one is abandoned and a new one established. (New Mexico Taxation and Revenue Department, 2025 Form PIT-1 Personal Income Tax Return instructions (residency, community property, lines 9 to 17, low- and middle-income exemption worksheet))

Someone who moves to New Mexico during the year intending to stay, and is still there on December 31, is a first-year resident, taxed as a nonresident for the period before the move. Someone who was a resident for fewer than 185 days and moved to another state before December 31, intending to stay there, is a part-year resident and is not taxed as a resident after leaving. (New Mexico Taxation and Revenue Department, 2025 Form PIT-1 Personal Income Tax Return instructions (residency, community property, lines 9 to 17, low- and middle-income exemption worksheet))

First-year, part-year and nonresident filers allocate income on Schedule PIT-B. Pensions and annuities are allocated to New Mexico only for the part of the year the recipient was a resident, and the pension and annuity income of a nonresident is not allocated to New Mexico at all. (New Mexico Taxation and Revenue Department, 2025 Schedule PIT-B Allocation and Apportionment of Income instructions)

Federal law bars a state from taxing the retirement income of someone who is no longer a resident or domiciliary. Pension, 401(k) and IRA payments earned in a New Mexico career are taxed only by the state where the retiree lives when they are paid. (4 U.S.C. 114, Limitation on State income taxation of certain pension income)