Most types of retirement income are taxable in New Mexico. However, New Mexico offers several exemptions that can significantly reduce or even eliminate tax on certain retirement benefits.
Social Security Benefits
New Mexico allows an exemption for Social Security income if your federal adjusted gross income (AGI) does not exceed the limits below:
- Single: AGI of $100,000 or less
- Married Filing Jointly: AGI of $150,000 or less
- Head of Household: AGI of $150,000 or less
- Surviving Spouse: AGI of $150,000 or less
- Married Filing Separately: AGI of $75,000 or less
If your AGI exceeds the threshold for your filing status, your Social Security income does not qualify for the exemption.
Armed Forces Retirement Pay
If you are an armed forces retiree or the surviving spouse of an armed forces retiree, you may qualify for an exemption of up to $30,000 of armed forces retirement pay included in New Mexico taxable income.
If both spouses qualify on a joint return, each may claim up to $30,000.
Program Entry
- Go to State Section.
- Select the three dots to edit the New Mexico return.
- Select Deductions from Income.
- Enter the amount of retirement pay included in your net income.
Railroad Retirement Benefits
Railroad Retirement Act annuities and benefits, as well as Railroad Unemployment Insurance Act sick pay, are exempt from New Mexico income tax if included in federal taxable income.
Retirement Income for Certain Tribal Members
Retirement or pension income may be exempt for enrolled members of New Mexico federally recognized tribes, nations, or pueblos when the retirement income resulted from employment performed within qualifying tribal lands and other requirements are met.
Other Retirement Income
Most other retirement income remains taxable in New Mexico, including:
- Pensions
- IRA distributions
- Annuities
- 401(k) distributions
- Other retirement plan distributions
These amounts are generally included in New Mexico taxable income unless a specific exemption applies.
Tax Rates
Retirement income that is not exempt is taxed using New Mexico's graduated income tax rates.
How to Claim Retirement Income Exemptions
If you qualify for an exemption for Social Security income, armed forces retirement pay, Railroad Retirement benefits, or another qualifying retirement exemption, complete Schedule PIT-ADJ and include the applicable exemption amount on your New Mexico return.
See also Is my military pension/retirement income taxable to New Mexico?