How New Mexico taxes retirement income
New Mexico does not tax Social Security benefits. Pensions and 401(k)/IRA withdrawals are partly taxed (there is an exclusion, then the rest is taxed). Social Security benefits are exempt from New Mexico income tax for most retirees, effective tax year 2022: single filers with less than $100,000 in income, married filing jointly/head of household/surviving spouse under $150,000, and married filing separately under $75,000 pay no NM tax on Social Security. Above those thresholds there is no NM-specific exemption, whatever portion of Social Security is included in federal taxable income (up to 85% under federal rules) flows through and is taxed at NM's ordinary graduated rates. Pension, 401(k), and traditional IRA distributions are generally taxable as ordinary income; New Mexico has no blanket retirement-income exclusion. However, taxpayers age 65 or older (or blind) may claim a general exemption of up to $8,000 per person against total income of any kind (not retirement-specific), which phases out at higher federal adjusted gross income, this is the main mechanism that shields part of many retirees' pension/401(k)/IRA income in practice. A separate $3,000 medical-expense exemption and a refundable 'Medical Care Credit for Persons 65 or Older' (worth up to $2,800) are also available to filers 65+ with unreimbursed medical expenses exceeding $28,000.
Retirement income tax in New Mexico, at a glance
| Income type | Taxed by New Mexico? |
|---|---|
| Social Security | No |
| Pensions | Partially (exclusion applies) |
| 401(k) / IRA withdrawals | Yes |
| Estate / inheritance tax | None |
| Avg. property tax rate | 0.63% of home value |
Does New Mexico tax Social Security benefits?
No. New Mexico does not tax Social Security benefits.
Does New Mexico tax pensions and 401(k) or IRA withdrawals?
Partly. Social Security benefits are exempt from New Mexico income tax for most retirees, effective tax year 2022: single filers with less than $100,000 in income, married filing jointly/head of household/surviving spouse under $150,000, and married filing separately under $75,000 pay no NM tax on Social Security. Above those thresholds there is no NM-specific exemption, whatever portion of Social Security is included in federal taxable income (up to 85% under federal rules) flows through and is taxed at NM's ordinary graduated rates. Pension, 401(k), and traditional IRA distributions are generally taxable as ordinary income; New Mexico has no blanket retirement-income exclusion. However, taxpayers age 65 or older (or blind) may claim a general exemption of up to $8,000 per person against total income of any kind (not retirement-specific), which phases out at higher federal adjusted gross income, this is the main mechanism that shields part of many retirees' pension/401(k)/IRA income in practice. A separate $3,000 medical-expense exemption and a refundable 'Medical Care Credit for Persons 65 or Older' (worth up to $2,800) are also available to filers 65+ with unreimbursed medical expenses exceeding $28,000.
For the mechanics of required withdrawals in retirement, see what is an RMD.
Sources
- New Mexico taxation of retirement income (Social Security, pensions, 401(k)/IRA): New Mexico Department of Revenue / Taxation.