Updated September 5, 2026. Quick answer: New Mexico taxes most pensions, IRA, and 401(k) distributions as ordinary income with no general retirement exclusion, but it gives military retirees a specific $30,000 exemption that is now permanent after a 2024 law removed its original expiration date, and it gives every resident 65 or older an $8,000 exemption against any type of income, including retirement income.
Confidence note: medium. This page is scoped to pension, IRA and 401(k) taxation specifically. For the state’s full retirement-tax picture (Social Security, tax rates, estate and probate), see how New Mexico taxes retirement income generally.
Pending, not current law: Bills introduced in New Mexico’s 2025 and 2026 legislative sessions, including SB 497, HB 221, and SB 116, would remove the $30,000 cap entirely and exempt all armed forces retirement pay. The 2025 version, SB 497, died in committee, and this session’s research could not independently verify a final enacted or failed status for the 2026 versions, so the existing $30,000 cap should be treated as current law unless confirmed otherwise closer to publication.
How pensions and retirement-account withdrawals are taxed
| Public (state/local government) pensions | New Mexico has no general exemption for state or local government pensions. The taxable amount is included in net income and taxed at New Mexico’s graduated rates, which run from 1.5 percent to 5.9 percent, though a taxpayer who is 65 or older may apply the $8,000 age based exemption described below against this income along with any other income they receive. |
|---|---|
| Private (employer) pensions | Private employer pensions have no specific New Mexico exemption and are taxed as ordinary income, subject to the same $8,000 age 65 and older exemption described below if the taxpayer qualifies. |
| Federal government pensions (FERS/CSRS) | Federal civilian government pensions such as FERS and CSRS have no specific New Mexico exemption beyond the general $8,000 age 65 and older exemption and are otherwise taxed as ordinary income. New Mexico’s specific retirement tax statute, NMSA 1978 7-2-5.13, is written only for armed forces retirees, and no primary source found this session extended it to federal civilian retirees. |
| Military retirement pay | An armed forces retiree, or the surviving spouse of one, may exempt $30,000 of armed forces retirement pay from net income under NMSA 1978 7-2-5.13. As originally written this exemption was set to expire after tax year 2026, but a 2024 law, House Bill 264, amended the statute to apply for tax year 2024 and thereafter, removing that expiration date, so as of this session the $30,000 exemption is current law with no confirmed sunset. |
| IRA and 401(k)/403(b) distributions | IRA and 401(k) distributions are taxable in New Mexico as ordinary income with no retirement account specific exemption, though the $8,000 age 65 and older exemption described below can be applied against this income if the taxpayer qualifies. |
| General retirement-income exclusion | New Mexico gives taxpayers who are 65 or older an exemption of up to $8,000 each against taxable income. This is a general age based exemption rather than one limited to retirement income specifically, and it is confirmed on the New Mexico Taxation and Revenue Department’s personal income tax overview page. The exact NMSA statute section number for this $8,000 exemption could not be independently confirmed this session, so it is described here without a specific section citation rather than guessing one. |
Coordinate this with your overall retirement plan
An adviser can help weigh how much of a pension or IRA withdrawal to take this year, whether a Roth conversion makes sense before or after a move, and how state tax interacts with the rest of your plan, but that does not replace the numbers in your own return.
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Social Security
New Mexico has exempted most Social Security benefits since 2022 for single filers under $100,000, joint filers or surviving spouses under $150,000, and separate filers under $75,000 in income, but a companion page on this site covers Social Security taxation in detail. Social Security has its own rules in every state; see the full breakdown in how New Mexico taxes retirement income generally.
Statute and sources
Governing citation: NMSA 1978 7-2-5.13 (armed forces retirement pay exemption); N.M. Taxation and Revenue Department, Personal Income Tax Information Overview (age 65 and older exemption; exact NMSA section for this exemption not independently confirmed this session).
- New Mexico Taxation and Revenue Department, Personal Income Tax Information Overview
- New Mexico Taxation and Revenue Department, Social Security Income Tax Exemption
- New Mexico Legislature, 2024 House Bill 264 (removes sunset on armed forces retirement pay exemption)
- FindLaw reproduction of NMSA 1978 7-2-5.13, used to confirm statutory text of the armed forces retirement pay exemption
Read September 5, 2026.
Related: how New Mexico taxes retirement income generally · does New Mexico tax Roth conversions? · Roth conversion taxes, all 51 jurisdictions.
General information drawn from each state’s own published statutes and revenue-department guidance, not legal, tax or financial advice. Figures and exemption amounts are current as of the date in the quick answer, are set by state law, and can change by future legislation; any pending bill named on this page is not yet law. This page cannot see your own return, which governs. We are not a law firm, a tax adviser, or a fiduciary, and this is not personalized advice.