New Mexico tax deductions and write-offs (2026)

Partly. New Mexico exempts up to $30,000 a year of armed forces retirement pay (the cap since tax year 2024); pay above $30,000 is taxed. HB 252 (2024) made the exemption permanent and extended it to surviving spouses of armed forces retirees. HB 221 (2026), which would have exempted 100%, stalled in committee. Other retirement income: Pensions and 401(k)/IRA withdrawals are taxable, but taxpayers 65+ (or blind) may deduct up to $8,000 per person. The full deduction applies at AGI up to $18,000 single / $30,000 joint, phasing out to zero at $28,500 / $51,000.

Partly. Pensions and 401(k)/IRA withdrawals are taxable, but taxpayers 65+ (or blind) may deduct up to $8,000 per person. The full deduction applies at AGI up to $18,000 single / $30,000 joint, phasing out to zero at $28,500 / $51,000. Classified as partial because of the income-tested age-65 exemption, which applies to any income, not just retirement income.

Partly. Federally taxable Social Security is exempt if AGI does not exceed $100,000 (single), $150,000 (married filing jointly, head of household, surviving spouse) or $75,000 (married filing separately). Above those limits, the federally taxable portion is taxed. These limits have applied since tax year 2022 and are not indexed. Bills introduced in 2026 to remove or phase out the caps (HB 92, SB 156) were not found to have been enacted. Separately, people 65+ may qualify for an income-based exemption of up to $8,000 each.

Yes: New Mexico offers the New Mexico Working Families Tax Credit, 25% of the federal EITC (refundable). ITIN filers eligible (based on the federal credit they would get with an SSN). Workers without children aged 18–24 also eligible. Residents only.

Only instead of income tax: itemizers in New Mexico pick sales tax (4.875% state rate, about 7.68% with local taxes) or state income tax, whichever is bigger. Levies a gross receipts tax rather than a sales tax; vehicles instead pay a 4% motor vehicle excise tax (less any trade-in) at titling.

Yes on your federal return if you itemize, within the $40,400 SALT cap. New Mexico adds its own break: property tax rebate up to $250 (PIT-RC) for owners or renters 65+ with modified gross income of $16,000 or less.

Yes: New Mexico offers the Property Tax Rebate for Persons 65 or Older. Rebate of up to $250 ($125 married filing separately) for low-income seniors where 6% of rent paid counts as property tax, claimed on Schedule PIT-RC with the state income tax return. Age 65+; modified gross income of $16,000 or less; cannot be claimed as a dependent.

No: New Mexico doesn't base registration on your car's value, so it isn't deductible as personal property tax. Passenger fees are set by factory shipping weight and drop after five years of registration; value is not a factor.

For 2026 New Mexico uses six brackets of 1.5%, 3.2%, 4.3%, 4.7%, 4.9% and 5.9% (single thresholds $5,500/$16,500/$33,500/$66,500/$210,000; MFJ/HoH $8,000/$25,000/$50,000/$100,000/$315,000).

Yes on your New Mexico return: Unlimited (full contribution). Only contributions to the state's own plan count. NM plans only; deductions recaptured on nonqualified withdrawals or rollovers to out-of-state plans.

Yes: Child Income Tax Credit per qualifying child (2025 amounts): $637 if AGI is $25,000 or less; $424 up to $50,000; $212 up to $75,000; $106 up to $100,000; $79 up to $200,000; $53 up to $350,000; $26 above $350,000. Refundable. Amounts are inflation-indexed annually.

Yes, as a business expense: New Mexico charges $50 to form an LLC; ongoing: None. No annual report required for LLCs. Filed via enterprise.sos.nm.gov.