New Mexico state income tax
New Mexico has a state income tax. It is graduated, with a top marginal rate of 5.9%. Six brackets for tax year 2025 and later, under HB 252 (Laws 2024, Chapter 67), the first major bracket restructuring since 2005 (the bottom rate dropped from 1.7% to 1.5% and a new 4.3% bracket was added). Single filers/estates/trusts: 1.5% up to $5,500; 3.2% on $5,500-$16,500; 4.3% on $16,500-$33,500; 4.7% on $33,500-$66,500; 4.9% on $66,500-$210,000; 5.9% over $210,000. Married filing jointly/head of household/surviving spouse: 1.5% up to $8,000; 3.2% on $8,000-$25,000; 4.3% on $25,000-$50,000; 4.7% on $50,000-$100,000; 4.9% on $100,000-$315,000; 5.9% over $315,000. Rates apply to New Mexico taxable income (federal taxable income with state additions/deductions). Capital gains are taxed under special rules (see below).
Does New Mexico have a state income tax?
Yes. New Mexico taxes individual income on a graduated schedule topping out at 5.9%. Six brackets for tax year 2025 and later, under HB 252 (Laws 2024, Chapter 67), the first major bracket restructuring since 2005 (the bottom rate dropped from 1.7% to 1.5% and a new 4.3% bracket was added). Single filers/estates/trusts: 1.5% up to $5,500; 3.2% on $5,500-$16,500; 4.3% on $16,500-$33,500; 4.7% on $33,500-$66,500; 4.9% on $66,500-$210,000; 5.9% over $210,000. Married filing jointly/head of household/surviving spouse: 1.5% up to $8,000; 3.2% on $8,000-$25,000; 4.3% on $25,000-$50,000; 4.7% on $50,000-$100,000; 4.9% on $100,000-$315,000; 5.9% over $315,000. Rates apply to New Mexico taxable income (federal taxable income with state additions/deductions).
| Item | New Mexico |
|---|---|
| State income tax | Yes, graduated |
| Top marginal rate | 5.9% |
| Capital gains | Special rules, up to 5.9% |
| State sales tax | 4.875% (plus local) |
| Avg. property tax rate | 0.63% of home value |
| Estate / inheritance tax | None |
How does New Mexico tax capital gains?
New Mexico taxes capital gains under special rules rather than at the ordinary income rate. New Mexico allows a deduction under NMSA 1978 Section 7-2-34 equal to the greater of: (1) the taxpayer's net capital gain, capped at $2,500 (raised from $1,000 for tax years beginning on or after January 1, 2025, per HB 37 (2024 session)); or (2) 40% of up to $1,000,000 of net capital gain income from the sale of a business apportioned to New Mexico (also effective 2025, before this change, the 40% prong applied to net capital gain generally, not just business-sale gains). For most individual investors (stocks, bonds, non-business real estate), the deduction is now effectively capped at $2,500; the rest of the gain is taxed as ordinary income at New Mexico's graduated rates, topping out at 5.9%. You still owe federal capital gains tax on top of any state tax. See how capital gains tax works in 2026.
What about retirement income in New Mexico?
Retirement income is taxed differently from wages in many states. For how New Mexico treats Social Security, pensions, and 401(k)/IRA withdrawals, see New Mexico retirement taxes.
Sources
- New Mexico income tax rates and brackets: New Mexico Department of Revenue / Taxation.
- New Mexico capital gains treatment: New Mexico tax authority.
- New Mexico sales tax: New Mexico Department of Revenue.