Starting in the 2025 tax year, New Mexicans will see the impact of the first major adjustment to the state’s income tax structure since 2005. All state taxpayers will owe less, but especially those who make the least.
Democratic Rep. Derrick Lente sponsored the measure, which was included in the $231 million tax bill passed by lawmakers.
“That is the principle in this package to providing true tax reform and benefit for all New Mexicans, especially those who are lower- to middle-income wage earners,” he said on the House floor.
Legislators added a sixth bracket with a 4.3% rate, allowing for more similar income levels to be grouped together.
Currently, single-filers who earn between $16,000 and $210,000 per year are in the same income bracket and taxed at the same rate of nearly 5% of what they make . Until a 2019 change, that was the top bracket. Now, that wide range of incomes will span four separate brackets and that 4.9% rate will start at an annual income of $66,500. Lawmakers also reduced the fixed amount some owe and lowered the percentage owed by those who make the least.
All New Mexicans will owe less in income tax under the new plan, whether they move into a new bracket or not. Most can expect to save around $200, with some seeing an even bigger drop.
The change will cost the state up to $176 million, according to a fiscal analysis.
Some Republicans wanted to see the Legislature share even more of the state’s record revenue with taxpayers. Rep. Jim Townsend proposed a 1% tax on all income levels, lowering the rate for everyone but especially the highest earners. That proposal failed on the House floor.
“I think the people of New Mexico didn’t get a fair shake on this,” he said of the approved income tax changes. “And I think we’ll probably all hear from them.”
The changes go into effect in January and taxpayers will see the savings when they file their returns in 2026.
