Standard Deduction Increased
Because New Mexico follows the federal standard deduction, taxpayers will see higher standard deduction amounts for tax year 2026:
- Single: $16,000
- Married Filing Jointly: $32,000
- Married Filing Separately: $16,000
- Head of Household: $24,000
Taxpayers who claim the federal standard deduction will generally use the same deduction amount on their New Mexico return.
Capital Gains Deduction Continues
New Mexico continues the expanded capital gains deduction for 2026.
Eligible taxpayers may deduct the greater of:
- $2,500 of qualifying net capital gains, or
- 40% of up to $1,000,000 of net capital gain income from the sale of a New Mexico business
To qualify for the larger deduction related to the sale of a business, the gain must be allocated or apportioned to New Mexico and included in federal taxable income.
Taxpayers who sold a qualifying New Mexico business during the year should review this deduction carefully, as it may provide a substantial tax benefit.