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Official Tax Guide

New Mexico Taxes 2025: Income, Sales, and Property Tax Guide

Complete guide to New Mexico state taxes. Income tax (1.7% - 5.9%), sales tax, and what you need to know before moving.

Updated January 15, 2026
5 min read

New Mexico State Tax Guide 2025

Welcome to New Mexico! As you prepare for your move to the Land of Enchantment, understanding the state’s tax structure is essential for financial planning. This guide provides an overview of New Mexico’s tax landscape for 2025, focusing on income, sales, and property taxes, as well as other key considerations for residents.

1. Income Tax

New Mexico utilizes a progressive income tax system, meaning tax rates increase as income levels rise. This is not a flat tax; lower-income earners pay a lower percentage compared to higher-income earners.

  • Tax Rate Structure (2025): The state income tax rates range from 1.7% to 5.9%.
  • Filing Considerations: Tax brackets are subject to change, and specific deductions or credits may apply depending on your filing status (single, married filing jointly, etc.). It is important to review the latest tax brackets provided by the New Mexico Taxation and Revenue Department when filing.

2. Sales and Use Tax

New Mexico’s sales tax structure is somewhat unique compared to other states, as it applies to a broad range of services as well as goods.

  • State Rate: The base state sales tax rate is 5.125%.
  • Local Taxes: While the state rate is fixed, local jurisdictions (counties and municipalities) may impose additional local option taxes. This means the total sales tax rate you pay at the register can vary depending on your specific location within New Mexico. Always check local rates for your new city or town.

3. Property Tax

Property taxes in New Mexico are generally administered at the county level. While specific rates vary, New Mexico is often considered to have property tax rates that are somewhat lower than the national average.

  • Assessment: Property taxes are based on the assessed value of your home and land.
  • General Context: For a general range, homeowners in the U.S. typically see property tax rates between 1% and 3% of a home's assessed value. New Mexico often trends toward the lower end of this spectrum, but this can vary significantly by county and specific school district levies.

4. Other Taxes

When budgeting for life in New Mexico, consider these additional tax types:

  • Gas Tax: New Mexico imposes a tax on motor fuel. The rate is subject to legislative adjustment, so check current figures for accurate budgeting.
  • "Sin" Taxes: The state levies excise taxes on specific goods, including alcohol and tobacco products.
  • Inheritance/Estate Tax: New Mexico does not have an inheritance tax or a separate estate tax. This is a favorable aspect for those planning estate transfers.

5. Retirement Income Taxes

For retirees, New Mexico’s tax treatment of retirement income is an important factor.

  • Taxation: New Mexico does tax most retirement income, including distributions from 401(k)s, IRAs, and pensions.
  • Social Security: Social Security benefits are generally taxable in New Mexico, though exemptions may apply depending on your total income level.
  • Deductions: The state does offer a low-income deduction for seniors, which can help reduce the tax burden for qualifying retirees.

6. Comparison to Neighbors

New Mexico’s tax structure differs from its neighbors, offering a distinct balance of tax burdens and benefits.

  • Texas: Texas has no state income tax, which is a major difference. However, Texas generally relies on higher property taxes and sales taxes to fund state services. New Mexico offers lower property taxes but imposes a state income tax.
  • Arizona: Arizona has a flat income tax rate (currently 2.5% as of recent legislation), which is simpler than New Mexico’s progressive system. Sales tax rates are comparable, though local variations apply in both states.
  • Colorado: Colorado utilizes a flat income tax rate (currently 4.4%). New Mexico’s progressive rates may result in a lower tax liability for lower-income earners compared to Colorado’s flat rate.

Disclaimer: Tax laws change frequently. The information provided in this guide is for general informational purposes only and is not a substitute for professional tax advice. Consult a CPA or tax professional regarding your specific financial situation.