Income Taxes in New Mexico
New Mexico's income tax is a moderate, six-bracket graduated system topping out at 5.9% for tax year 2026, paired with a genuinely partial Social Security exemption structured as a hard income cliff rather than a full carve-out, and no broad exemption for pension, 401(k), or IRA income.
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Learn moreA six-bracket system, moderate by national standards
New Mexico's individual income tax runs six graduated brackets for tax year 2026, per the Tax Foundation's own 2026 New Mexico page: 1.5% on the first $5,500 of taxable income, 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, and a top marginal rate of 5.9% on taxable income above $210,000 for single filers ($315,000 married filing jointly). This structure is genuinely moderate nationally -- neither among the lowest nor highest top marginal rates.
Social Security is exempt only below real, hard-cliff income thresholds
Social Security benefits included in federal adjusted gross income are exempt from New Mexico state income tax only below $100,000 AGI for single filers, $150,000 for married filing jointly/head of household/surviving spouse, and $75,000 for married filing separately -- structured as a hard cliff rather than a phase-out, meaning crossing the threshold by even one dollar makes the full benefit amount taxable. A 2026 legislative attempt to remove those caps entirely (Senate Bill 156) had its action postponed indefinitely on January 27, 2026, meaning it did not pass -- the income-capped exemption remains New Mexico's actual current law.
Other retirement income does not carry the same exemption
Pension, 401(k), and IRA distributions do NOT carry a comparable blanket exemption and remain subject to New Mexico's standard graduated rates, offset only by a modest $8,000 statewide low- and middle-income/senior exemption. New Mexico does offer one real, distinct, and now-permanent retirement benefit worth noting directly: up to $30,000 of armed-forces retirement pay is exempt from state income tax, made permanent by a 2024 legislative amendment (effective January 1, 2025) that removed a prior sunset date and extended eligibility to surviving spouses.
New Mexico's labor-market backdrop
New Mexico's unemployment rate ran a real, current, and comparatively weak 4.8% (seasonally adjusted) as of July 2026, unchanged from June 2026 but up a full 0.8 percentage points from 4.0% a year earlier, and 0.7 percentage points above the 4.1% national rate the same month -- a real, disclosed, comparatively soft labor-market reading worth weighing against any income-tax comparison.
Key takeaways
- New Mexico's income tax is a six-bracket system for 2026: 1.5% to 5.9%, with the top rate applying above $210,000 taxable income single / $315,000 married filing jointly.
- Social Security is exempt only below hard-cliff AGI thresholds ($100,000 single / $150,000 married filing jointly) -- a 2026 bill to remove those caps (SB 156) did not pass.
- Pension, 401(k), and IRA income does not carry a broad exemption and is generally taxed at standard rates, offset only by a modest $8,000 exemption.
- Armed-forces retirement pay carries a real, now-permanent $30,000 exemption, extended to surviving spouses as of a 2024 law change effective January 1, 2025.
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