Nicknamed the Land of Enchantment, it’s no wonder why there is such a growing curiosity and burgeoning population in the southwestern confines of New Mexico. Home to 32 sprawling state parks, beautiful flora and fauna, and endless sights to see, the state of New Mexico is a true American gem.
Whether you’re native to this great land or it’s your first year settled in, familiarizing yourself with New Mexico’s tax code should be at the top of your priority list. Tackling tax season can be confusing. With all of the number crunching and paper collecting on your agenda, it’s easy to feel a bit lost in the mix. Using this guide, we’ll walk you through everything you need to know to live your best and most responsible life in the Land of Enchantment.
Get a head-start on tax season by using our intelligent New Mexico state income tax calculator.
As you dive into this guide on New Mexico state taxes, we’ll explore how state taxes are structured, which items are subject to taxes, what figures you can expect on your return, and show you how you can file your state taxes in compliance with the New Mexico Department of Taxation and Revenue.
What does “state tax” mean in New Mexico?
New Mexico’s state tax system employs a bracketed progressive income tax schedule. The Land of Enchantment ranks among the 20 lowest state tax codes in the country, which is great news for New Mexicans. Residents are responsible for paying four primary forms of state and local taxes; state income tax, local property taxes, state gross receipt taxes, and local gross receipt taxes. Your overall New Mexico tax liability will depend on your specific financial situation, area of residence, number of dependents, and more.
New Mexico State Taxes: Quick Facts
Income tax: 2.2% - 6.6%
Sales tax: 5.125%
Property tax: 0.78%
Annual 2019 Tax Burden ($75,000/yr income)
Total Estimated Tax Burden
Remaining Income = $65,617
New Mexico Tax Brackets
New Mexico’s state income tax works on a progressive system that closely mirrors the federal tax bracket system which employs fewer tax brackets and lower tax rates. The progressive system works by ensuring those with higher annual incomes pay higher annual taxes. For each filing status, there are four different New Mexico income tax brackets with rates ranging from 1.7% to 4.9%.
Check out our tax rate bracket chart below to see what rates you can expect this tax season.
$0 - $5,500
$5,500 - $11,000
$11,000 - $16,000
Married Filing Jointly
$0 - $8,000
$8,000 - $16,000
$16,000 - $24,000
Married Filing Separately
$4,000 - $8,000
$8,000 - $12,000
Head of Household
$0 - $8,000
$8,000 - $16,000
$16,000 - $24,000
New Mexico Personal Income Tax
New Mexico tax brackets are significantly different than the current federal tax brackets. Under Trump’s Tax Cuts and Jobs Act, federal brackets range between 10% and 37%. New Mexico’s range at a significantly lower rate ranging between 2.2% and 6.60%.
Because New Mexico uses a 7-section tiered bracket system to impose income taxes, it’s important to understand where your income aligns with the bracket threshold and what to expect when it comes to filing your tax return. Your filing status will play a key part in determining your personal income tax rate, so be sure to check our charts accordingly.
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Capital gains generated in The Land of Enchantment are taxable as regular personal income.
Capital gains tax is levied on the profits incurred from selling certain types of assets including real estate property and stock investments. Capital gains can be subject to both federal and state taxation, but vary on a state-by-state basis. As of 2019, the federal government taxes long-term capital gains at rates ranging between beginning at 0% and up to 15% depending on your particular income bracket. Short-term capital gains, which are held for 12 months or under, are taxed at the standard income tax rate.
New Mexico State Sales Tax
Believe it or not, New Mexico doesn’t technically impose a sales tax the same way other states traditionally do. Instead, businesses are charged a gross receipts tax that is collected by both the state and county governments, and passed on to the consumer. The gross receipts tax rate is either reflected in the purchase price of an item or explicitly tacked on as added cost you’d see on a paper receipt.
Currently, the statewide gross receipts tax rate is 5.125%. County rates vary anywhere between 0.375% and 2.188% —depending on the county you live in, you could pay a combined “sales” tax of up to 7.313%.
New Mexico’s gross receipts tax applies to an assortment of consumer goods including clothing, prepared foods, non-prescription drugs, and more. Groceries and prescription drugs are exempt from this taxation.
New Mexico Excise Tax
What are excise taxes?
Excise taxes are often referred to as “indirect taxes” because instead of being charged directly to the taxpayers, they are charged to the vendor and passed on through the reflected price of product. This means you may be paying a few dollars above the retail value of your six-pack in order to account for your state’s excise taxes. Excise taxes are imposed by both the federal and state governments, which means the final price you pay includes the burden of double taxation.
Excise taxes that are used to deter consumers from engaging in activities that could be considered harmful to society are nicknamed “sin taxes.” Common examples of these sin taxes include alcohol, tobacco, marijuana, and gambling.
Let’s take a look at New Mexico’s many excise tax rates and how they may be affecting your pockets.
Alcohol excise tax in New Mexico
Alcohol excise tax is one of the most commonly employed examples of sin taxes. Each state can impose their own set of fee rates when it comes to taxing beer, wine, and liquor. This means that some states house higher alcohol rates than others. For New Mexico residents, alcohol excise taxes are fairly high.
New Mexico’s alcohol excise tax is broken into three categories:
New Mexico beer tax - $0.41 per gallon
New Mexico wine tax - $1.70 per gallon
New Mexico liquor tax - $6.06 per gallon
Tobacco excise tax in New Mexico
In an effort to drastically minimize the volume of tobacco consumption across the country, many state governments impose hefty excise taxes on cigarettes and other tobacco products. While these taxes are charged directly to the vendor, the added costs are factored into the final price of any tobacco product sold in New Mexico. Curious to know how consuming tobacco is affecting your wallet? Check out the rates below.
New Mexico cigarette tax: $1.66 / 20 cigarettes + 5.125% local gross receipts tax
New Mexico tobacco and snuff tax: 25% wholesale price + federal excise taxes
Gas tax in New Mexico
Excise taxes on gasoline are common across the country, and the costs are always reflected in the price-per-gallon you pay at the pump. Fortunately for New Mexico residents, owning a vehicle in the Land of Enchantment isn’t a heavy burden to bear. Home to one of the lowest gas excise tax rates in the country, New Mexicans only pay an added $0.17 per gallon on gasoline.
New Mexico State Property Tax
Did you know that New Mexico has some of the lowest property tax rates in the country? On top of enjoying the many perks of beautiful landscapes, friendly people, and gorgeous homes, New Mexico residents can also reap the many financial benefits of homeowner-friendly property tax rates. The state’s average effective property tax rate is 0.78%, measuring far below the national average of 1.13%.
In fact, the average homeowner in New Mexico will likely spend $1,272 on property taxes per year. Compared to the national average of $2,200, New Mexico residents are far better suited up for property savings.
The reason behind these ultra-low property tax rates is that the state government has capped the amount of taxable value a property can increase by at a rate of 3%.
The state of New Mexico does not impose any inheritance or estate taxes, though there are exceptions to this. You may end up owing an inheritance tax if you inherit property located in a state that imposes an inheritance tax. If you have recently inherited out-of-state property, be sure to check the local laws so you don’t end up with an additional and unexpected tax bill.
New Mexico State Tax Credits
New Mexico is home to an expansive list of tax credits made available to taxpayers to reduce their annual tax bills. Tax credits are leveraged by both the federal and state government as a way to assist qualified taxpayers in reducing their liability dollar-for-dollar. Depending on the conditions of the credit, you may be eligible for one or more state-level tax credits in the Land of Enchantment.
Here are a few of the most common credits that may apply to your return this year:
Medical Care Credit: The refundable Medical Care Credit is designed to assist seniors who have spent $28,000 or more in unreimbursed and uncompensated medical bills during the fiscal year. These expenses must have been spent on either themselves, their spouse, or their dependents.
Working Families Tax Credit: Any taxpayer who qualified for the federal Earned Income Tax Credit is automatically eligible for the New Mexico state-level Working Families Tax Credit. Designed to help low-to-moderate income working individuals and families, the value of the WFTC will vary depending on the recipient’s income and number of dependents.
Renewable Energy Production Tax Credit: New Mexico residents who own and operate a qualified energy generator are eligible for the Renewable Energy Production Tax Credit. The final credit value is the sum of $0.01 per kilowatt-hour of electricity produced by the generator using a qualified energy resource in the tax year. A variable rate of credit is tacked on for electricity generated through solar energy.
Check out these additional tax credits that could reduce your tax liability:
Approved Film Production Tax Credit
New Mexico Angel Tax Credit
Special Needs Adopted Child Tax Credit
Child Day Care Credit
At Community Tax, we make it our responsibility to find each and every tax credit you may qualify for to ensure you receive the highest possible return each year.
New Mexico State Tax Deductions and Exemptions
If you’re feeling overwhelmed by your New Mexico tax bill, fear not, there are ways to soften the blow. By taking advantage of New Mexico’s available deductions and exemptions you can reduce your overall liability and save more money in the long-haul. Let’s explore the conditions of each to help you determine which make the most financial sense for your unique tax situation.
Standard deduction in New Mexico
New Mexico allows two flat rate standard deductions that are available to all resident taxpayers who do not choose to itemize their deductions. The current standard deductions in New Mexico align exactly with the current federal deductions:
$12,000 for single filers
$24,000 for joint filers
$18,000 for head of household
Itemized deductions in New Mexico
If you itemized deductions on your federal tax return, tackling your state-level itemized deductions will be essentially the same. However, because state and local taxes are not deductible in New Mexico, you will be required to add back all or a portion of the amount you deducted on your state-level taxable income.
Personal exemptions in New Mexico
A personal exemption is an amount of money that taxpayers are able to deduct for themselves, and for each dependent claimed on their tax return. In essence, qualifying personal exemptions work to reduce your overall taxable income. Unfortunately for the Land of Enchantment, Trump’s rollout of the 2017 Tax Cuts and Jobs Act eliminated exemptions for dependents, effectively causing many families’ annual tax bills to increase.
The good news is that there are a number of additional income adjustments and exemptions unaffected by the TCJA. These include:
The New Mexico low-and-middle income exemption
Medical care expense deduction
Deduction for qualified withdrawals for a New Mexico medical care savings account
Deduction for contributions to a New Mexico 529 college savings plan
Deduction for federally taxable contributions made by you or your employer
Deduction for your taxable income if you worked full-time for the armed forces (including the National Guard) or were on active duty
Discover more deductions - speak to a tax pro today
Looking to estimate how much money you’ll get back on your New Mexico tax refund? Assembling your documents and crunching numbers can leave you feeling less than confident in your final calculations, so why not use a tool that will help you best estimate your upcoming tax return? Our smart tax calculator is designed to give you an accurate measurement of how much state tax you’ll owe and how much you may receive in a refund check.
Using our tax calculator is simple—all you’ll need is your:
Adjusted Gross Income (AGI)
Number of exemptions
Number of dependents
List of tax credits or deductions you qualify for
How to Pay New Mexico Taxes
Paying state taxes in New Mexico is fairly simple. Residents have four viable avenues for taking care of their annual tax bill. Let’s take a look at each payment method:
Pay online: New Mexico WebFile makes filing taxes online easier than ever. Fast and completely free, WebFile is incredibly user friendly and supports electronic checks and credit card payments.
Pay by mail: If you plan on paying your taxes via postage, you can send a check, money order, or cashier’s check to your district’s field office. With any mailed-in payment, you will need to include a payment voucher to the check or money order to properly ensure that your payment is properly applied to your tax bill.
Pay in person: New Mexico taxpayers can pay taxes in person by visiting a local district office.
Pay by payment plan: If you’re unable to cover the entire cost of your tax bill in one payment, you can request to have a payment plan installed. There are two types of payment plans available; short-term and installment agreements. Short-term payment plans offer 12 months or less to pay off your tax bill whereas installment agreements employ written agreements that offer up to 72 months to pay off your tax bill.
Fallen behind on state taxes? Get help with tax resolution today
New Mexico taxpayers should keep in mind that tax season means filing both federal and state tax returns. Fortunately, because the federal tax code is universally applied to all American taxpayers, you won’t have to worry about learning any new tax terms or conditions to fulfil your civic duty. Federal Taxes are due by April 15th of every fiscal year—mark your calendars ahead of time to avoid any hefty late fees or interest costs.
To ensure you’re in compliance with your legal tax-paying obligations, you’ll want to handle all of your data collection and number crunching with extreme, meticulous care. Wary about your ability to get every calculation right? It may be in your best interest to consider outsourcing your tax preparation to a tax professional. Count on Community Tax to gain the assurance you need to file with confidence.
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