Updated October 16, 2026. Quick answer: New Mexico’s documents read give an IRA distribution no exclusion and do not mention inherited IRAs: the PIT-1 return starts from “federal adjusted gross income as reported on your federal Form 1040”, and the retirement exemptions printed include one for armed forces retirement pay.
New Mexico at a glance
| Item | What the documents say |
|---|---|
| How the state taxes retirement-account income | Taxed as income, starting from federal adjusted gross income; no general IRA exclusion in the documents read |
| Do the state’s documents address beneficiaries? | Not addressed for IRAs; the beneficiary wording is about estates and trusts |
| Retirement exclusion or credit | No IRA exclusion; $30,000 of armed forces retirement pay for a retiree or surviving spouse of one, and an exemption of up to $8,000 at 65 or older (or blind), stepped down as federal adjusted gross income rises |
| Rate in the documents read | Not printed in the documents read |
| State inheritance or estate tax | Not mentioned in the documents read |
| Changed for 2026? | No 2026 change to this rule is stated in the documents read |
What the New Mexico documents say
The PIT-1 instructions list an IRA distribution among the payments for which a filer should “collect all your federal Form(s) 1099-R, RRB-1099 and SSA-1099”. The return then starts from federal adjusted gross income on the federal Form 1040.
On beneficiaries the instructions speak only of estates and trusts: “each beneficiary of the estate or trust must include” the beneficiary’s share of the estate or trust income on the New Mexico PIT-1. That is about income an estate or trust passes through, and the instructions do not say how an inherited IRA is treated.
The PIT-ADJ instructions allow “an amount equal to $30,000 of armed forces retirement pay” for an armed forces retiree or the surviving spouse of one. A separate exemption for persons 65 or older, or blind, says “You may be eligible for an exemption of up to $8,000” based on filing status and federal adjusted gross income.
The federal 10-year rule and your New Mexico tax year
IRS Publication 590-B says a beneficiary may be required to take the entire account balance by the “end of the 10th year following the year of the owner’s death”, with exceptions for certain beneficiaries. Because the balance generally has to come out within that window, the timing of each withdrawal decides which tax year it lands in. See the 10-year rule and annual RMDs, lump sum versus spreading withdrawals and inherited IRA rules.
Withholding and other state taxes
Whether a state withholds from a withdrawal is a separate rule: see state withholding on retirement withdrawals. For New Mexico’s own death taxes, see inheritance tax by state.
What the documents do not say
- The documents read do not mention inherited accounts or beneficiaries of retirement accounts.
- The documents read do not print New Mexico’s rate schedule, so none is shown here.
- They do not say whether the $8,000 exemption for persons 65 or older can be claimed by a beneficiary of an inherited IRA.
- They say nothing about a deduction or credit for estate tax or income in respect of a decedent.
Common mistakes
- Assuming New Mexico’s rule for your own retirement income also covers an account you inherited: read whether its documents address beneficiaries, and confirm the point with a New Mexico preparer.
Related: state tax on inherited IRA withdrawals, state by state, whether New Mexico taxes 401(k) and IRA withdrawals, New Mexico retirement taxes, inheritance tax by state, inherited IRA rules, spouse versus non-spouse beneficiary rules, and state withholding on retirement withdrawals.
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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
- IRS Publication 590-B, Distributions from Individual Retirement Arrangements (IRAs): https://www.irs.gov/pub/irs-pdf/p590b.pdf
Sources: the primary documents linked above, read on October 16, 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.