Updated October 5, 2026. Quick answer: Yes. New Mexico taxes trust income at graduated rates from 1.5% to 5.9% for tax year 2025, and the Taxation and Revenue Department says a fiduciary must file if it is “a resident trust or estate that generates income” or a nonresident trust or estate with income from New Mexico sources.
How New Mexico treats trust income
| Item | What the documents say |
|---|---|
| Treatment | New Mexico taxes trusts and estates through Form FID-1, the New Mexico Fiduciary Income Tax Return, and the Taxation and Revenue Department states that “Every fiduciary who must file a federal Fiduciary Income Tax Return” also files a FID-1. |
| Who counts as a resident trust | The department explains that a trust is domiciled in New Mexico “if the trustee is a resident of New Mexico” or if the principal place from which the trust is managed or administered is in New Mexico. The pages read do not set out a settlor or beneficiary test, and the form asks a resident trust or estate to mark a box. |
| Rate on trust income | Section 7-2-7 as amended by House Bill 252 in 2024 sets graduated bands of 1.5%, 3.2%, 4.3%, 4.7%, 4.9% and 5.9%, with 5.9% applying to taxable income over $210,000, in the table headed “For single individuals and for estates and trusts” which starts at 1.5% on taxable income not over $5,500 for taxable years beginning on or after January 1, 2025. |
| Distribution deduction | The 2025 FID-B Schedule 1, which trusts with income inside and outside New Mexico complete, lists a line titled “Deduction for distributions not shown above” but the documents read do not explain how the deduction is computed or what limits apply. |
| Nonresident trusts | The department says a fiduciary must file if it is a resident trust or estate that generates income, or a “non-resident trust or estate that generates income from New Mexico sources” and it lists business in, into or from New Mexico, property in New Mexico and compensation in New Mexico as the income sources. |
| Return to file | Fiduciaries file the 2025 FID-1, and the form states that the return, accompanying schedules and payments are “due on the same day as the required federal return” with the original mailed to the department and e-filing offered through its Taxpayer Access Point site. |
| Grantor trusts | On grantor trusts the department says “Generally, grantor trusts do not file form FID-1” but a grantor trust that becomes irrevocable at the grantor’s death must file it. |
| Beneficiary withholding and composite tax | The FID-1 has sections for beneficiary withholding tax and composite income tax, and the composite line reads “Composite income tax rate (5.9%)” while the withholding line shows the same 5.9% rate. |
A $10,000 example
The tax on $10,000 of taxable income a trust keeps depends on the bracket it lands in. Taxed wholly at the lowest printed rate, 1.5%, the tax is computed as $10,000 x 1.5% = $150; taxed wholly at the highest, 5.9%, it is computed as $10,000 x 5.9% = $590. The state’s own schedule decides which applies. Federal tax on the trust’s income still applies.
Income the trust passes out to a beneficiary is handled as the distribution deduction row above describes.
What changes in 2026
The latest documents read print no 2026 change to how trust income is taxed.
Federal rules
The state’s treatment sits on top of the federal one. The federal brackets a trust faces are laid out in trust tax brackets versus individual brackets, and capital gains that a trust keeps are covered in capital gains stay in the trust. The IRS explains the federal return in the About Form 1041 page.
Related: how New Mexico taxes retirement income, whether New Mexico taxes pensions, what a living trust costs in New Mexico, federal trust tax brackets, and trust income tax by state.
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Answer againSources
- Fiduciary Income Tax for Trusts and Estates (New Mexico Taxation and Revenue Department): https://www.tax.newmexico.gov/all-nm-taxes/2020/10/23/fiduciary-income-tax-for-trusts-and-estates/
- 2025 FID-1 New Mexico Fiduciary Income Tax Return with schedules (New Mexico Taxation and Revenue Department): https://realfile.tax.newmexico.gov/2025fid-1.pdf
- House Bill 252 as passed, Section 5 amending NMSA 1978 Section 7-2-7 (New Mexico Legislature, 2024 session): 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.