New Mexico 2025 Income Tax: 1.5% Bottom Rate and 5.9% Top

(NEW MEXICO) New Mexico is changing its personal income tax in a way that matters for anyone trying to plan a move, accept a job offer, or set a family budget in the state. For tax year 2025, the state is cutting the lowest rate to 1.5% (down from 1.7% in 2024) while keeping the top rate at 5.9%. The change applies to income earned January 1, 2025, through December 31, 2025, and you’ll report it on a return you file in early 2026.

The state is also keeping two features that make filing easier for many newcomers: New Mexico continues to match the federal standard deduction, and it keeps a $2,500 low- and middle-income exemption tied to federal adjusted gross income (FAGI) thresholds.

For immigrants, international students, new hires relocating from abroad, and workers moving in from other states, the big issue isn’t just the headline rate. It’s the full process: how withholding changes in your paycheck, how your residency status affects what New Mexico can tax, and what records you’ll need when it’s time to file.

According to analysis by VisaVerge.com, state tax details like these often shape real take-home pay more than people expect when they compare job offers across states.

What the 2025 change means in plain terms

New Mexico uses a progressive tax system. That means your income is taxed in layers: the first slice of taxable income is taxed at the lowest rate, the next slice at the next rate, and so on. You do not pay 5.9% on all your income just because you reach a higher bracket.

For tax year 2025, New Mexico’s rates span 1.5% to 5.9%. The top rate still applies to higher earners, including single filers over $210,000 (with higher threshold amounts for other filing statuses).

What’s new is that the lower and middle brackets are more detailed, including a 4.3% step between 3.2% and 4.7%, which softens the jump for many middle incomes.

If you’re deciding whether you can afford rent, childcare, or a car in New Mexico, the practical effect is that some workers will see slightly lower state tax on their first dollars of taxable income during 2025—especially if they also qualify for the $2,500 exemption.

Key takeaway: The bottom bracket falls to 1.5% for 2025, the top rate remains 5.9%, and the combination of the federal standard deduction match plus the $2,500 exemption can meaningfully affect take-home pay for lower- and middle-income households.

Step 1 — January 2025: watch your paycheck withholding

The first place most people feel a tax law change is in withholding. New Mexico updated its withholding formula effective Pay Period 4, 2025 (covering pay dated after January 1, 2025) to reflect the new brackets, including the 1.5% bottom rate.

For many employees, there’s nothing to file just because the state changed the tables—employers generally apply the updated calculation automatically. Still, immigrants and new arrivals should take a careful look at their first few 2025 pay stubs:

• Check that your work location is correctly listed as New Mexico if you’re physically working there.
• Confirm your employer stopped withholding for your old state if you moved into New Mexico.
• If you work remotely, confirm which state your wages are sourced to under your employer’s payroll setup.

This matters because withholding is only an estimate. If too little is withheld, you can face a balance due later. If too much is withheld, you may be waiting for a refund you could have used during the year.

Step 2 — anytime in 2025: confirm your New Mexico tax status

New Mexico applies rules to residents, nonresidents, and part-year residents who have New Mexico-source income. Many newcomers get tripped up here—especially people who arrive mid-year on a work visa, students who move for school, or families who relocate in stages.

A simple way to think about it:

• Part-year resident: If you move into or out of New Mexico during 2025, you’re treated as a part-year resident.
• What gets taxed: As a part-year resident, you’re generally taxed on:
  1. Income earned while you are a resident, plus
  2. New Mexico-source income while you are a nonresident.

For immigrants, this can happen quickly. Someone might arrive in March, start work in April, and still have a remote consulting contract from a prior country or state. Keep a simple timeline (move-in date, move-out date, first day worked in New Mexico, last day worked in New Mexico). That timeline will help you and your preparer allocate income to New Mexico correctly.

Step 3 — all year: track your federal numbers

New Mexico continues to match the federal standard deduction, which reduces taxable income without itemizing. That linkage often helps immigrants because most people already prepare their federal return first, then carry numbers into the state return.

The most recently published standard deduction amounts under 2024 rules (used on returns filed in early 2025) are:

For tax year 2025 returns filed in 2026, the standard deduction is expected to rise when the IRS announces inflation-adjusted figures, and New Mexico will follow those federal numbers.

In practice, your federal return is the anchor. If your federal adjusted gross income (FAGI) is wrong, your New Mexico return often becomes wrong too.

Step 4 — late 2025: check whether you qualify for the $2,500 exemption

New Mexico keeps a $2,500 low- and middle-income exemption based on FAGI thresholds. If you qualify, it reduces taxable income and can lower your state tax.

Exemption thresholds (as provided):

• Single: $2,500 exemption if FAGI is $36,667 or less
• Married filing separately: exemption if FAGI is $27,500 or less
• Married filing jointly or head of household: exemption if FAGI is $55,000 or less

Many immigrants in entry-level roles, first-year U.S. jobs, or part-time work may fall under these thresholds—especially if they arrived mid-year and did not earn a full year of U.S. wages.

Step 5 — keep the documents that matter

Tax filing is not an immigration benefit application, but your tax records can matter a lot later. People often need tax returns to show “good moral character,” prove household income for family-based cases, or document continuous presence for certain relief.

Keep copies of:

• W-2s, 1099s
• Your filed state and federal returns
• Work authorization and identity records that explain why you are working

When you start a new job, your employer will normally ask you to complete Form I-9, the federal employment eligibility verification form. You can find the official form and instructions on the U.S. Citizenship and Immigration Services page for Employment Eligibility Verification (Form I‑9). That form doesn’t set your New Mexico tax, but it is part of the paper trail many immigrants maintain alongside tax records.

Step 6 — early 2026: file the correct return for the correct year

The new brackets apply to income earned in 2025, filed in early 2026. If you are filing or amending a 2024 return, you must still use the older 1.7%–5.9% bracket structure for that year.

Practical habit: before you begin, confirm the tax year printed on the form or in the software. Mixing years is a common mistake—especially for people who arrive in the U.S. and file their first returns while also correcting paperwork for a prior year.

For forms, instructions, and filing options straight from the state, use the New Mexico Taxation and Revenue Department’s official page for New Mexico personal income tax filing and forms. That’s the best place to confirm the correct year’s instructions, including guidance for nonresidents and part-year residents.

Step 7 — set expectations on refunds, balances due, and timing

Most filers care about two outcomes: will they owe, and when will they get a refund. The 2025 withholding changes may reduce under-withholding for some people, but they won’t be perfect for everyone.

You’re more likely to see a mismatch if you:

• Changed jobs or had gaps in work during 2025
• Worked in more than one state
• Had a big change in family status (marriage, divorce, new child)
• Started working shortly after arriving in the U.S. and had partial-year income

If you’re unsure, don’t wait until filing season. Review your year-to-date withholding in the fall while there’s still time to adjust.

Step 8 — use the brackets as a planning tool

Because New Mexico keeps the top rate at 5.9% and lowers the bottom bracket to 1.5% for tax year 2025, the state signals it wants lighter tax on lower earners while retaining a progressive structure.

For many immigrant households, that can mean a little more room in the monthly budget—especially when combined with the standard deduction match and the $2,500 exemption if you qualify.

Simple planning checklist:

1. Know your move dates.
2. Track which income is New Mexico-source.
3. Watch withholding after January 1, 2025.
4. Keep clean records so you can file smoothly in early 2026.

Following these steps will help you minimize surprises and make better decisions when comparing job offers or timing a move.