How Do I Deduct a Military Spouse's Income on a New Mexico Return?

Under the Military Spouses Residency Relief Act (MSRRA), a qualifying military spouse may be able to exclude income earned in New Mexico from New Mexico taxable income and have that income taxed by the spouse's state of domicile instead.

Who Qualifies?

To qualify for this exemption, all of the following must be true:

1. The servicemember has declared a legal domicile in another state for state income tax withholding purposes.
2. The servicemember is in New Mexico because of military orders.
3. The spouse is in New Mexico solely to be with the servicemember.

Important: This relief applies only to the spouse's qualifying income. Non-resident servicemembers must continue to report and allocate non-military income to the state where it was earned.

How Do I Stop New Mexico Withholding?

A qualifying military spouse may claim exemption from New Mexico withholding by submitting Form RPD-41348, Military Spouse Withholding Tax Exemption Statement, to their employer.

A new form must generally be completed each year or whenever the spouse's situation changes.

How Do I Claim a Refund of New Mexico Tax Withheld?

If New Mexico tax was withheld from qualifying military spouse income, complete Schedule PIT-B, New Mexico Allocation and Apportionment of Income, and exclude the qualifying income from New Mexico-source income.

Program Entry

1. Select State
2. Edit New Mexico return (Click the 3 dots)
3. Choose Additions to Income
4. Open NM Allocation and Apportionment of Income (PIT-B)
5. Select Yes to complete Schedule PIT-B
6. Go to Allocation of Wages
7. Locate Qualifying Non-Resident Military Servicemember's Spouse Income
8. Enter the amount of New Mexico wages that qualify to be excluded from New Mexico taxation

The software will use this information to reduce New Mexico taxable income and calculate any refund of New Mexico tax withheld.

Important Notes

• A qualifying non-resident military spouse may exclude income earned from services performed in New Mexico by excluding that income from Column 2 of Schedule PIT-B.
• When completing Schedule PIT-B, qualifying non-resident military spouses should mark the applicable military spouse box at the top of the form to indicate eligibility under the Military Spouses Residency Relief Act.
• The excluded income may still be taxable in the spouse's state of legal residence and may need to be reported on that state's return.