Updated October 5, 2026. Quick answer: Yes. New Mexico taxes interest and dividends as income, and the PIT-ADJ instructions have you “Enter your interest and dividend income from all state and municipal bonds” as an addition, then deduct interest on U.S. obligations and on New Mexico bonds.
How New Mexico treats dividends and interest
| Item | What the documents say |
|---|---|
| Treatment | Taxed on the graduated schedule |
| Rates, as printed in House Bill 252 (2024) | 1.5% on the first $5,500 (single) or $8,000 (joint), rising through 3.2%, 4.3%, 4.7% and 4.9% to 5.9% on income over $210,000 (single) or $315,000 (joint); the joint column reads “Over $315,000 $14,624 plus 5.9% of excess over $315,000.” |
| A gap in the sources | The 2025 PIT-1 instructions print no rate tables, and the bill text archived does not show that it was signed, so confirm the current schedule with the Department |
| New Mexico bonds | “State and local bonds exempt from New Mexico taxable income” are deducted, so own-state bond interest is not taxed |
| U.S. obligations | Line 9 deducts “Interest received on U.S. government obligations”, but Ginnie Mae, Fannie Mae and Freddie Mac interest “is not deductible as interest on U.S. government obligations.” |
| Mutual funds | “You may deduct dividends from mutual funds invested in U.S. government obligations” by the percentage so invested, if the fund’s statement shows it |
| IRAs | “You may not deduct interest and dividends from IRAs.” |
A $20,000 example
Taxable dividends and interest of $20,000 taxed wholly at the lowest printed rate, 1.5%, would add $300; taxed wholly at the top rate, 5.9%, $1,180. Your total taxable income decides the bracket.
What changes in 2026
The documents read print no 2026 change; the schedule in House Bill 252 applies to tax years beginning on or after January 1, 2025.
Federal rules
The state’s treatment sits on top of the federal one. Qualified dividends and ordinary dividends are sorted out on the Form 1099-DIV, as the site explains in Box 1a and 1b: ordinary versus qualified dividends, and interest is reported as covered in 1099-INT Box 1. The IRS explains the federal side in Topic no. 403, Interest Received and Topic no. 404, Dividends.
Related: whether New Mexico taxes capital gains, whether New Mexico taxes pensions, how New Mexico taxes retirement income, dividends and interest tax by state, and how tax-exempt interest is reported.
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Answer againSources
- 2025 PIT-ADJ Instructions: Schedule of Additions, Deductions, and Exemptions: https://www.tax.newmexico.gov/wp-content/uploads/2026/01/2025-PIT-ADJ-Instructions.pdf
- House Bill 252 (2024), as introduced: https://www.nmlegis.gov/Sessions/24 Regular/bills/house/HB0252.PDF
- House Bill 252 (2024), HTRC/HB 252/a text posted in the final folder: https://www.nmlegis.gov/Sessions/24 Regular/final/HB0252.pdf
Sources: the primary documents linked above, read on October 5, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer, the plan administrator or the agency itself is the right place to confirm anything consequential.