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 residents 65 or older, depending on income level, an exemption of up to $8,000 against any type of income, including retirement income.
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.
Drawing a pension? Whether the state withholds tax from it, from its own documents: New Mexico tax withholding on pension payments.
Selling your home? How the state taxes the profit, from its own tax documents: Does New Mexico tax the profit from selling your home?.
Married, or planning for a spouse’s death? Whether the state is a community property state, from its own statutes: Is New Mexico a community property state?.
The state’s income tax schedule: the New Mexico tax brackets for 2026.
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.
Trusts have their own page: does New Mexico tax trust income.
Dividends and interest have their own page: does New Mexico tax dividends and interest.
Annuity payments have their own page: does New Mexico tax annuity income.
Planning for what you leave behind? The state’s estate tax answer, from its own tax documents: Does New Mexico have an estate tax?.
Saving for a child’s college? The state’s 529 break has its own page: New Mexico 529 plan tax deduction.
Military retired pay has its own page: does New Mexico tax military retirement.
Selling stocks, funds or real estate has its own page: does New Mexico tax capital gains.
Withdrawals from a 401(k) or IRA have their own page: does New Mexico tax 401(k) and IRA withdrawals.
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, and the 2026 versions, HB 221 and SB 116, all show a status of Died on the New Mexico Legislature bill pages as of September 30, 2026, so the existing $30,000 cap remains current law.
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 252 (Section 32), amended the statute for taxable years beginning on or after January 1, 2025 (HB 252, Section 42(B)), 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. |
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How our partner relationships workSocial 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.
Figures verified against the New Mexico Legislature bill pages and texts (HB 264, HB 252, SB 497, HB 221, SB 116) and the New Mexico Taxation and Revenue Department personal income tax and Social Security exemption pages on September 30, 2026; the codified text of NMSA 1978 7-2-5.13 and the statute section for the $8,000 age exemption were not re-checked.
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 252, Section 32 (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.
For your own numbers, run the Retirement Tax Comparison Tool (2026): Compare Any Two States.
See Retirement Tax Relocation (2026): The Four Taxes That Change When You Move for the full state by state breakdown.