Updated October 4, 2026. Quick answer: Yes. New Mexico taxes 401(k) and IRA withdrawals: the PIT-1 instructions say “your retirement income is taxable in New Mexico”. The main relief is “an exemption of up to $8,000 based on your filing status” for taxpayers 65 or older, which depends on income and is not specific to retirement accounts.
More state retirement-income schedules, line by line: New Mexico PIT-ADJ retirement lines.
Inherited an IRA? What the state’s own documents say about taxing those withdrawals: New Mexico tax on inherited IRA withdrawals.
Hold a 403(b) or 457(b)? What the state’s own documents say about taxing those withdrawals: does New Mexico tax 403(b) and 457(b) withdrawals.
Withdrawing from an IRA or 401(k)? Whether the state withholds tax from it, from its own documents: New Mexico tax withholding on IRA and 401(k) withdrawals.
What New Mexico does with 401(k) and IRA withdrawals
The age exemption is described as “Exemption for persons age 65 or older, or blind”. Separate exemptions cover armed forces retirement pay (“in an amount equal to $30,000 of armed forces retirement pay”) and “Railroad Retirement Act annuities and benefits”, and they do not reach private 401(k) or IRA accounts. The instructions do not describe Roth distributions separately.
| Item | What the documents say |
|---|---|
| Treatment | Taxable, with an income-tested exemption at 65 or older |
| Age 65 exemption | Up to $8,000, with income limits of $51,000 (joint or head of household), $28,500 (single) and $25,500 (married filing separately) |
| Armed forces retirement pay | $30,000 exempt |
| State rates | Graduated; the instructions point to a separate tax table that was not available to read for this page |
| Source | New Mexico Taxation and Revenue Department, 2025 PIT-1 and PIT-ADJ instructions |
A $40,000 withdrawal
At $40,000 of income a single filer is above the $28,500 limit, so the age exemption does not reach that filer. A joint or head of household filer is under $51,000 and may take up to $8,000, leaving at least $32,000 (computed as $40,000 minus $8,000) in New Mexico income.
What changes in 2026
The documents read print no 2026 change to the retirement-income treatment.
Federal rules
The state’s treatment sits on top of the federal one. The IRS explains the federal tax on these withdrawals in Publication 590-B, Distributions from Individual Retirement Arrangements and Publication 575, Pension and Annuity Income.
Related: whether New Mexico taxes pensions, how New Mexico taxes retirement income, whether New Mexico taxes Roth conversions, and the state-by-state table of 401(k) and IRA withdrawal tax.
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Answer againSources
- Instructions for 2025 Form PIT-1, Personal Income Tax Return: https://realfile.tax.newmexico.gov/2025pit-1-ins.pdf
- Instructions for 2025 PIT-ADJ, Schedule of Additions, Deductions, and Exemptions: https://realfile.tax.newmexico.gov/2025pit-adj-ins.pdf
Sources: the primary documents linked above, read on October 4, 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.