New Mexico has both a state income tax and a state gross receipts tax
Yes, New Mexico charges state income tax on wages, self-employment income, and other earnings. The state also levies a gross receipts tax (GRT), which is a sales-like tax on business revenue. If you work or own a business in New Mexico, you will owe state income tax, state gross receipts tax, or both.
The income tax rates range from 1.7% to 5.9% depending on your income bracket and filing status. The gross receipts tax rate varies by industry and location, typically between 5% and 8.8%. Property tax, which is assessed by counties, is a separate obligation.
Key Takeaways
- New Mexico's state income tax applies to residents and nonresidents who earn money in the state, with rates from 1.7% to 5.9% based on income level.
- The gross receipts tax is paid by businesses on their revenue, not by individual employees, though it affects what businesses charge customers.
- New Mexico has no sales tax at the state level, but the gross receipts tax serves a similar function and is collected by the state.
- County property taxes are separate from state income and gross receipts taxes and vary by location.
- Tax forms and current rates are available through the New Mexico Department of Revenue website.
How New Mexico's income tax brackets work
New Mexico uses a progressive tax system, meaning the rate increases as your income rises. You do not pay the highest rate on all your income—only on the portion that falls into each bracket. For the 2024 tax year, single filers face rates starting at 1.7% on the first portion of income and reaching 5.9% on income above a certain threshold. Married filing jointly, head of household, and other filing statuses have different bracket thresholds.
The state adjusts these brackets annually for inflation, so the income ranges change each year. You can find the current brackets on the New Mexico Department of Revenue website. If you work for an employer, your employer withholds state income tax from your paycheck based on the W-4 form you file with them.
What the gross receipts tax covers
The gross receipts tax is a tax on business revenue—the total money a business takes in before expenses. Unlike sales tax, which is paid by the customer at checkout, the gross receipts tax is the business's responsibility. However, most businesses pass the cost to customers by including it in prices, similar to how sales tax works in other states.
The rate depends on the type of business. Retail sales are typically taxed at around 5.125% at the state level, but local gross receipts taxes can add another 0.5% to 3.75%, bringing the total to 5.625% to 8.8% depending on your location. Services, manufacturing, and other business types have different rates. Certain items like groceries and prescription medications may be taxed at lower rates or exempt.
Who pays New Mexico income tax
You owe New Mexico state income tax if you are a resident of the state or if you earned income in New Mexico as a nonresident. Residents must report all income from any source—wages, self-employment, investments, rental property. Nonresidents report only income earned within New Mexico.
If you moved to New Mexico during the year, you may be considered a resident for tax purposes depending on when you established residency. Military members stationed in New Mexico may have different rules. The New Mexico Department of Revenue can clarify your residency status if you are unsure.
Filing important date and where to file
New Mexico follows the federal tax calendar. Individual income tax returns are due by April 15 each year, the same important date as federal returns. If you file a federal extension, you automatically receive an extension for your New Mexico return as well.
You file New Mexico income tax returns with the New Mexico Department of Revenue, not with your county or city. Forms and instructions are available on their website. If you use tax preparation software or a tax professional, they can file your state return along with your federal return. Businesses file gross receipts tax returns monthly or quarterly depending on their revenue.
Deductions and credits available in New Mexico
New Mexico allows a standard deduction similar to the federal system, or you can itemize deductions if that results in a larger reduction. The standard deduction amount varies by filing status and is adjusted annually. You can also claim certain credits, such as the earned income tax credit (EITC) if you may have access to based on income and family situation.
New Mexico offers additional credits for specific situations—for example, credits for dependent care expenses, education costs, and property tax paid. Some credits are refundable, meaning you can receive money back even if you owe no tax. The Department of Revenue website lists all available credits and the requirements for each.
How New Mexico compares to other states
New Mexico's top income tax rate of 5.9% is moderate compared to other states. Some states have no income tax at all (Texas, Florida, Nevada, and others), while some charge rates above 10%. The combination of income tax and gross receipts tax means New Mexico's overall tax burden depends on whether you are an employee or business owner and what you purchase.
Because New Mexico has no state sales tax, the gross receipts tax is the closest equivalent. States with sales tax typically do not have a gross receipts tax. This structure means New Mexico residents may pay less on purchases than residents of states with traditional sales tax, but the difference varies by item and location.
Frequently Asked Questions
Do I have to file a New Mexico tax return if I only work part-time?
If you earned any income in New Mexico and are a resident, you generally must file a return unless your income is below the filing threshold for your filing status. Even if you do not owe tax, filing may allow you to claim refundable credits. Check the current filing requirements on the New Mexico Department of Revenue website.
What happens if I move out of New Mexico during the year?
You are a resident for the portion of the year you lived in New Mexico and a nonresident for the remainder. You report all income earned while a resident and only New Mexico-source income earned while a nonresident. Your employer should adjust your withholding when you leave, but you may owe additional tax or receive a refund when you file.
Is the gross receipts tax the same everywhere in New Mexico?
No. The state charges a base gross receipts tax, but cities and counties add their own local gross receipts taxes on top. The total rate varies by location. A business in one city may pay a different total rate than a business in another city, even though both are in New Mexico.
Can I deduct federal income tax paid from my New Mexico state return?
No. New Mexico does not allow a deduction for federal income tax paid. You can deduct state and local taxes (SALT) on your federal return up to $10,000, but that is a federal rule, not a New Mexico rule.
Where do I send my New Mexico tax return?
Mail returns to the address listed in the tax form instructions, or file electronically through the New Mexico Department of Revenue website or approved tax software. Electronic filing is faster and reduces errors. If you use a tax professional, they handle filing for you.