Retiring in New Mexico: how your income is taxed
New Mexico is fairly tax-friendly for retirees. On a typical retirement income it ranks #34 of 51 for the lowest state income tax.
The rules in New Mexico
- Social Security: Exempt if AGI is under $100,000 (single), $150,000 (joint, head of household or surviving spouse) or $75,000 (married filing separately). There is no phase-out: $1 over the limit and all federally taxable benefits are taxed.
- Pensions: Pensions are taxed, except that at 65 and older each person can exempt up to $8,000 of income at low incomes: the full $8,000 below about $18,000 of AGI (single) or $30,000 (joint), shrinking to zero at $28,500 (single) or $51,000 (joint). The same exemption covers 401(k) and IRA withdrawals, and most middle-income retirees get nothing. Military retirement: the first $30,000 is exempt (made permanent from 2025).
- 401(k), 403(b) and IRA withdrawals: 401(k) and IRA withdrawals are taxed, except that the same income-limited $8,000 exemption at 65 and older applies (gone above $28,500 of AGI single or $51,000 joint).
- At 65 and older: New Mexico uses the federal standard deduction, including the extra amount at 65.
Calculate your New Mexico retirement taxes
State income tax in New Mexico: $665 a year
In New Mexico, the 401(k)/IRA amount counts as IRA withdrawals, which don't qualify for the pension exclusion. Enter withdrawals from employer plans such as a 401(k) or 403(b) as pension.
In New Mexico you'd pay about $665 in state income tax and $4,336 in federal income tax on $70,000 of retirement income, keeping $64,999 (7.1% total).
New Mexico ranks #34 of 51 for the lowest state tax on this income. 19 states charge no state income tax on this income.
What retirees pay in New Mexico
| Retirement income | State tax (single) | State tax (married) | Federal tax (single) |
|---|---|---|---|
| $24,000 Social Security, $12,000 401(k)/IRA | $0 | $0 | $0 |
| $30,000 Social Security, $20,000 pension, $20,000 401(k)/IRA | $665 | $68 | $4,336 |
| $40,000 Social Security, $40,000 pension, $50,000 401(k)/IRA, $10,000 other income | $5,135 | $2,421 | $19,812 |
Age 67 or older, 2026 rules including the federal senior deduction. For married couples, income is the household total and both spouses are 67 or older. State estimates apply New Mexico's main exclusions and may differ for income-tested credits.
States with lower retirement taxes
Moving to New Mexico in retirement?
Compare the tax on your Social Security, pension and 401(k)/IRA income, and typical living costs, with the state you'd leave. These are the states most households moving to New Mexico come from (IRS migration data, 2022–2023).
- Texas to New Mexico
- California to New Mexico
- Arizona to New Mexico
- Colorado to New Mexico
- Florida to New Mexico
- Washington to New Mexico
Frequently asked questions
Does New Mexico tax Social Security?
Partly taxed. Exempt if AGI is under $100,000 (single), $150,000 (joint, head of household or surviving spouse) or $75,000 (married filing separately). There is no phase-out: $1 over the limit and all federally taxable benefits are taxed.
Does New Mexico tax pensions?
Partly taxed. Pensions are taxed, except that at 65 and older each person can exempt up to $8,000 of income at low incomes: the full $8,000 below about $18,000 of AGI (single) or $30,000 (joint), shrinking to zero at $28,500 (single) or $51,000 (joint). The same exemption covers 401(k) and IRA withdrawals, and most middle-income retirees get nothing. Military retirement: the first $30,000 is exempt (made permanent from 2025).
Does New Mexico tax 401(k) and IRA withdrawals?
Partly taxed. 401(k) and IRA withdrawals are taxed, except that the same income-limited $8,000 exemption at 65 and older applies (gone above $28,500 of AGI single or $51,000 joint).
Is New Mexico a good state to retire for taxes?
For a single retiree with $30,000 Social Security, $20,000 pension, $20,000 401(k)/IRA, New Mexico charges about $665 in state income tax, ranking #34 of 51 (lowest tax first).
Related
Sources: tax.newmexico.gov, tax.newmexico.gov (2), nmlegis.gov, nmlegis.gov (2), nmlegis.gov (3), law.justia.com, law.justia.com (2), aarp.org. Rules reviewed . Some 2026 amounts were not yet published or sources differed; confirm with the state revenue department.