Updated October 7, 2026. Quick answer: Not unless you ask in writing. New Mexico taxes resident pension and annuity income, but the Taxation and Revenue Department’s guide says payors need not withhold New Mexico income tax “unless requested to do so by the recipients” of the payments.
Drawing a pension? Whether the state withholds tax from it, from its own documents: New Mexico tax withholding on pension payments.
New Mexico withholding at a glance
| Item | What the documents say |
|---|---|
| Is it required? | No. Payors withhold only if the recipient requests it in writing |
| Rate or amount | No percentage; the payor withholds the amount requested unless it is less than $10.00 |
| How to start or stop it | A written request to the payor; the guide read names no state form |
| Direct rollover | Not stated in the documents read |
| Changed for 2026? | No change stated; the guide read is Rev. 10/2018 |
What the New Mexico documents say
FYI-107, the Taxation and Revenue Department’s guide to New Mexico withholding tax, says income from pensions and annuities of residents is subject to New Mexico personal income tax. It adds that New Mexico does not require payors to withhold New Mexico income tax “unless requested to do so by the recipients”.
If a recipient asks in writing, the guide says the payor must deduct and withhold the requested amount, “unless the requested amount is less than $10.00”. It names no state form for the request.
A $50,000 withdrawal: cash in hand or a direct rollover
Take a $50,000 401(k) withdrawal paid to you. The IRS says a taxable eligible rollover distribution paid to you from an employer plan is subject to “mandatory income tax withholding (generally at a rate of 20%)”, which on $50,000 is $10,000 (computed as $50,000 times 20%) held back for federal tax. New Mexico taxes the income but sets no percentage for withholding: the New Mexico amount withheld is $0 unless you ask the payor in writing, and then it is the amount you request, if that is at least $10.00.
The other path is a direct rollover to an IRA or another plan. For federal tax the IRS says “The mandatory withholding doesn’t apply in a direct rollover”. The New Mexico documents read do not say how a direct rollover is treated for state withholding, so confirm it with the payer before choosing.
What a mover should know
This page is about New Mexico as a state of residence. An instruction line written for a nonresident or part-year filer is not the rule for a resident, and none of the documents read settles a part-year or two-state case, so check each state’s own rule. The federal side is the same everywhere; CMG’s federal 20% withholding on a pension lump sum page covers it.
What the documents do not say
- The one document read is the Rev. 10/2018 guide. It names no state form, cites no statute, does not address a direct rollover, and states no change for 2026.
Common mistakes
- Assuming no withholding means the income is untaxed; the guide says resident pension and annuity income is subject to New Mexico tax.
- Making the request by phone or form number the guide does not name; the guide says to request it in writing.
- Assuming the answer for one state applies to another, or that state withholding settles the state tax owed at filing.
Related: how New Mexico taxes 401(k) and IRA withdrawals, New Mexico retirement taxes, retirement withholding calculator, and retirement taxes by state.
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Answer againSources
- FYI-107, An Individual’s Guide to New Mexico Withholding Tax (Rev. 10/2018): https://realfile.tax.newmexico.gov/FYI-107%20-%20An%20Individual’s%20Guide%20To%20New%20Mexico’s%20Withholding%20Tax.pdf
- IRS Tax Topic 413, Rollovers from retirement plans: https://www.irs.gov/taxtopics/tc413
Sources: the primary documents linked above, read on October 7, 2026. General information, not tax advice. Your own facts decide the outcome, and a tax professional or the state agency itself is the right place to confirm anything consequential.