Overview of New Mexico Taxes
New Mexico has a progressive income tax system, with five brackets that are each dependent on income level and filing status. The tax rates, which vary from 1.70% to 5.90%, are ranked in the bottom 20 on a nationwide scale. No New Mexico cities levy local income taxes.
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New Mexico Paycheck Calculator
New Mexico Paycheck Quick Facts
- New Mexico income tax rate: 1.70% - 5.90%
- Median household income: $58,722 (U.S. Census Bureau)
- Number of cities that have local income taxes: 0
How Your New Mexico Paycheck Works
When you get a new job in New Mexico, you will have to fill out a W-4 form. This is the form that your employer will use to figure out how much money to withhold from your paychecks for federal income taxes. That money goes to the IRS, which counts it toward your annual income taxes. There are a number of factors that affect how much you pay in federal income taxes, including your salary, marital status and number of dependents.
The IRS recently made major revisions to the Form W-4. It removed the option to claim allowances, as well as the option to claim personal or dependency exemptions. The new form also uses a five-step process that allows filers to declare additional income, and it requires you to enter annual dollar amounts for things such as total annual taxable wages, non-wage income as well as itemized and other deductions.
Your employer also withholds FICA taxes from your paychecks. Medicare and Social Security taxes together make up FICA taxes. Medicare tax is 1.45% of your wages and Social Security tax is 6.2% of your wages. Your employer will match that amount so your total contribution is double what you actually pay. If you earn over $200,000 as a single filer, head of household or qualifying widow(er), wages in excess of that amount are subject to a 0.9% Medicare surtax, which employers do not match. Married couples filing separately pay this tax on income over $125,000 and married couples filing jointly pay in on income over $250,000.
Also consider that your paycheck size depends on how often you get paid. If you get paid biweekly, your checks will be more frequent and smaller than if you get paid once a month.
New Mexico has fairly low income tax rates. The state has a progressive tax system with five brackets that are determined by income level and filing status. Single individuals in the Land of Enchantment pay 1.70% on the first $5,500 of their taxable income; 3.20% on income up to $11,000; 4.70% on income up to $16,000; 4.90% on income up to $210,000; and 5.90% on income over $210,000. The tax rates remain the same for those with other filing statuses, but the income levels shift.
No cities in New Mexico charge local income taxes, so you don’t have to worry about that.
If you are planning a move to New Mexico or if you are interested in refinancing a property in the state, take a look at our New Mexico mortgage guide. The guide details important information about rates and the different kinds of loans you’ll be considering when getting a mortgage in the state.
A financial advisor can help you understand how taxes fit into your overall financial goals. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
How You Can Affect Your New Mexico Paycheck
If you opt to get benefits from your New Mexico employer, whatever you pay for those benefits will come out of your paycheck. They’ll also come out pre-tax (before income tax is removed). For example, if you get health insurance for you and your family through an employer-sponsored plan, your premiums will be deducted from your wages. The same goes for contributions to a retirement plan like a 401(k) or 403(b). Because these retirement accounts are pre-tax, upping your contributions to these will actually lower the amount of your income that is subject to taxes.
You can also shelter more of your money from taxes in a health savings account (HSA) or a flexible spending account (FSA). You can use these accounts to pay for medical-related expenses, like certain prescriptions and co-pays. A word of caution if you have an FSA: Only $610 will roll over between 2023 and 2024 and $640 between 2024 and 2025, so whatever you put in above that amount is use-it-or-lose-it.
If you are worried about having to pay a lot of taxes in April, you can have your New Mexico employer withhold an extra dollar amount from each of your paychecks, say $20. This will decrease the size of your paychecks by that amount, but it will also help to spread out your tax burden over the entire year, thereby lowering the chances that you are hit with a big bill come tax season.
