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.
Assumptions behind this comparison
The ranking uses a full-year resident, single filer age 67, with $30,000 Social Security, $20,000 private defined-benefit pension, $20,000 traditional IRA withdrawals under 2026 rules. It models a general private pension and traditional IRA withdrawals. Public or military pension exceptions, early-distribution penalties and itemized deductions require separate checking. Maryland and Indiana estimates include an approximate statewide-average county income tax; other local income taxes are not modeled. A state with no income tax differs from a state that exempts only specified retirement income.
The joint table uses two spouses age 67, with each income category split equally between them. Personal exclusions follow each spouse's own eligible income; some states instead allow a joint cap. The calculator initially assigns household income to you and lets you enter your spouse's actual age and share. Read the source instructions for your pension type.
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, but each eligible filer 65 or older can claim a general income exemption of up to $8,000. It can cover pensions, IRA withdrawals and ordinary interest or dividends together. The amount depends on federal AGI: $8,000 through $18,000 single or $30,000 joint, dropping in $1,000 steps to $1,000 at $28,500 single or $51,000 joint, and zero above those limits. If both spouses are 65 or older, each gets the table amount against their joint income; it does not depend on which spouse owns the pension. Military retirement has a separate $30,000 subtraction.
- 401(k), 403(b) and IRA withdrawals: 401(k) and IRA withdrawals are taxed, except that at 65 or older the general income exemption can cover them along with other taxable income, using the same income-based amount. There is no second allowance for a separate account.
- 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, qualifying employer-plan withdrawals can receive the pension exclusion while traditional IRA withdrawals do not. Keep each account in its own field when changing state; the calculator applies the state-specific treatment.
The employer-plan field supports federally taxable private 401(k) / 403(b) retirement distributions owned by someone aged 60 or older. Earlier distributions and Hawaii, Mississippi or Pennsylvania employer-plan scenarios are not calculated; funding or plan retirement eligibility needs a separate check. Enter each amount once; do not include completed rollovers, Roth payments or special public/military plans.
Older shared links did not identify employer-plan withdrawals separately. Pension and IRA amounts have been left unchanged. If an old amount includes 401(k) or 403(b) withdrawals, move that portion into the employer-plan field before comparing states; the tool cannot infer the original account type.
Household totals include taxable private pensions and traditional retirement withdrawals. Other ordinary income means taxable interest and ordinary dividends; capital gains, qualified dividends, tax-exempt interest, wages, Roth distributions and special public or military pension rules need a separate calculation. Disability and survivor eligibility are not assessed by this tool. Age bands represent the listed ages for the full year; midyear eligibility and birth-date exceptions need checking.
Local income taxes are not modeled here, except the approximate statewide-average county rates included when you select Maryland or Indiana.
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 traditional IRA withdrawals | $0 | $0 | $0 |
| $30,000 Social Security, $20,000 private defined-benefit pension, $20,000 traditional IRA withdrawals | $665 | $68 | $4,336 |
| $40,000 Social Security, $40,000 private defined-benefit pension, $50,000 traditional IRA withdrawals, $10,000 other income | $5,135 | $2,421 | $19,812 |
Age 67, 2026 rules including the federal senior deduction. For the joint column, income is the household total, both spouses are 67, and each owns 50% of every income category. State estimates apply New Mexico's main exclusions and may differ for income-tested credits.
Lower-tax states for the age-67 example
The amounts below use the fixed example above. Comparison links carry the last valid household entered in the calculator, including each spouse's income and age; the destination recalculates that household. Finish correcting invalid entries before using a comparison.
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, but each eligible filer 65 or older can claim a general income exemption of up to $8,000. It can cover pensions, IRA withdrawals and ordinary interest or dividends together. The amount depends on federal AGI: $8,000 through $18,000 single or $30,000 joint, dropping in $1,000 steps to $1,000 at $28,500 single or $51,000 joint, and zero above those limits. If both spouses are 65 or older, each gets the table amount against their joint income; it does not depend on which spouse owns the pension. Military retirement has a separate $30,000 subtraction.
Does New Mexico tax 401(k) and IRA withdrawals?
Partly taxed. 401(k) and IRA withdrawals are taxed, except that at 65 or older the general income exemption can cover them along with other taxable income, using the same income-based amount. There is no second allowance for a separate account.
Is New Mexico a good state to retire for taxes?
For a single retiree with $30,000 Social Security, $20,000 private defined-benefit pension, $20,000 traditional IRA withdrawals, 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), realfile.tax.newmexico.gov, nmlegis.gov (4), 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.