New Mexico has a graduated individual income tax system, meaning that the tax rate you pay increases as your taxable income increases. The rates range from 1.70% to 5.90%, depending on your filing status and income level. The New Mexico state income tax is a tax that is levied on individuals who earn ordinary income. This type of income includes paychecks from a job, profits from a business, interest, dividends, and royalties. It also includes wages and salaries from self-employment. It is different from other types of income, such as long-term capital gains or qualified dividends, which receive preferential tax treatment. The state nicknamed the Land of Enchantment taxes its residents on their net income, which is the total amount of adjusted gross income after all deductions are subtracted. Its top tax rate is 5.9% for single filers and 14.2% for joint filers, which is relatively moderate compared to other states. In addition, the state offers a number of deductions and credits, including a credit for children with special needs and unreimbursed medical expenses.
How to File New Mexico Income Tax?
All residents, nonresidents with income derived from New Mexico sources and members of Indian nations, tribes or pueblos who work on land outside their homes must file a New Mexico income tax return using Form PIT-1. The return is used to claim state rebates, credits, and deductions, including the Low-income Comprehensive Tax Rebate and the child care credit.
The tax structure in New Mexico is progressive, meaning that the taxes are higher on lower-income households. In fact, the lowest fifth of earners pays more than 10% of their income in taxes. New Mexico is also a member of the Interstate Tax Agreement, which means that taxes paid in another state are credited towards your New Mexico tax liability.
Key Things to Know About New Mexico State Income Tax
- You must file a New Mexico personal income tax return if you are a resident of the state or if you earned any income from sources within the state.
- The deadline to file your New Mexico income tax return is April 15th of the following year.
- You can file your return electronically or by mail.
- There are a number of credits and deductions available to New Mexico taxpayers, such as the earned income tax credit, the child tax credit, and the education credit.
- You can find more information about New Mexico state income tax on the New Mexico Taxation and Revenue Department website: https://www.tax.newmexico.gov/
New Mexico Gross Receipts Tax
In addition to the income tax, New Mexico also has a gross receipts tax, which is essentially a sales tax on most goods and services. The state portion of the gross receipts tax is currently 4.875%, but local jurisdictions can add their own additional taxes, bringing the total sales tax rate in some areas to as high as 8.813%.