New Mexico Tax Rates

This post provides an overview of the primary taxes levied at the state level in New Mexico. The information contained here is intended for general reference. New Mexico’s tax structure is notable for its unique Gross Receipts Tax instead of a traditional sales tax and for its low property tax burden. For individuals or businesses seeking comprehensive support with tax filings, compliance, or strategic planning, indinero offers expert services. We encourage all who utilize this summary to explore the tailored tax support available through indinero.

Individual Income Tax

New Mexico utilizes a graduated state individual income tax system with five tax brackets.

  • State Rates (2024 Tax Year): Rates range from a low of 1.7% to a top marginal rate of 5.9%.
    • The top rate of 5.9% applies to taxable income over $210,000 for single filers and $315,000 for married couples filing jointly.
  • Retirement Income:Social Security benefits are tax-exempt for single filers with income under $100,000, and joint filers with income under $150,000.
    • Taxpayers aged 65 and older may be eligible to exempt up to $8,000 of certain retirement income, depending on their income level.
  • Unique Exemption: The state provides a full income tax exemption on all income for residents who are 100 years of age or older.
  • Local Income Tax: New Mexico does not impose a local or county income tax.

Gross Receipts Tax (GRT) and Use Tax

New Mexico does not have a conventional sales tax. Instead, it utilizes a Gross Receipts Tax (GRT), which is legally a tax on the business for the privilege of doing business in the state, although it is nearly always passed on to the consumer.

  • State Rate: The state GRT base rate is 5.125% (as of mid-2024, subject to change).
  • Local Taxes: Local jurisdictions (counties and municipalities) impose significant additional local GRT rates.
  • Combined Rate: The combined state and local GRT rate varies widely by location, ranging from the state base of 5.125% up to approximately 9.0625% in the highest-taxed areas.
  • Broad Base: The GRT is notable because it applies to a much broader base of transactions than a traditional sales tax, including the sale of most tangible goods, most services, and rents.
  • Exemptions: Key exemptions and deductions include groceries (unprepared food for home consumption) and prescription drugs.
  • Compensating Tax (Use Tax): A compensating tax (New Mexico’s equivalent of a use tax) is imposed on goods purchased outside of the state for use in New Mexico if the GRT was not paid.

Property Tax (Ad Valorem Tax)

Property taxes in New Mexico are collected at the local level by counties and are among the lowest in the U.S.

  • Assessment: Property is appraised at its market value annually. The taxable value of residential real estate is legally set at one-third (33.33%) of the appraised value.
  • Taxable Value Cap: The taxable value of a primary residence is capped from increasing by more than 3% per year, even if the market value rises higher, providing significant stability for homeowners.
  • Tax Calculation: The tax owed is calculated by applying the local mill levy (the local tax rate, set by local budgets) to the low taxable value.
  • Property Tax Freeze: Homeowners who are 65 or older or who have a disability may qualify for a property tax valuation freeze, further limiting increases.
  • Effective Rate: The effective property tax rate is generally around 0.72%, well below the national average.

Corporate Income and Franchise Tax

New Mexico imposes both a corporate income tax and a small annual franchise tax.

  • Corporate Income Tax Rates: The tax is imposed on corporate net income using a tiered, graduated structure:
    • 4.9% on net income of $500,000 or less.
    • 5.9% on net income over $500,000.
  • Corporate Franchise Tax: A small annual Franchise Tax of $50 is levied on every domestic and foreign corporation that exercises its corporate franchise in the state.
  • Apportionment: For multi-state corporations, New Mexico generally uses a three-factor formula (property, payroll, and sales), equally weighted, to apportion business income. However, certain businesses, like manufacturers and headquarters operations, can elect to use a single sales factor formula.

Unique and Excise Taxes

  • Severance Tax: The state imposes a significant severance tax on the extraction of natural resources, such as oil, natural gas, coal, and copper. This tax is a major component of state revenue.
  • Cannabis Tax: Retail sales of recreational cannabis are subject to both the local GRT and an additional 12% state excise tax, which will phase up to 18% by 2030.
  • No Estate or Inheritance Tax: New Mexico does not impose a state-level estate tax or inheritance tax.

R&D Offer Quiz

Step 1 of 3

Answer to find out if you're eligible for R&D tax credits.

Do the activities performed relate to a new or improved business component’s function, performance, reliability, quality, or composition?(Required)
For Example: A mid-sized packaging company develops a slightly modified cardboard box design to improve its stacking strength (reliability) for warehouse storage, involving minor adjustments to the corrugation pattern to reduce collapse under standard weight loads.
Is your company trying to discover information to eliminate uncertainty concerning the capability or method for developing or improving a business component?(Required)
For Example: A furniture manufacturer investigates whether a cheaper wood adhesive can hold joints as effectively as the current one during assembly, testing bond strength to resolve doubts about its capability in standard production lines.
Do the activities performed constitute a process of experimentation?(Required)
For Example: An auto parts supplier runs a series of bench tests on different lubricant formulations to find one that reduces friction in engine bearings more effectively, systematically comparing wear rates over simulated operating cycles.