by Santa Fe, New Mexico – If you’re a senior navigating retirement in New Mexico, you’ll want to know about the extra standard deduction available for residents aged 65 and older. While New Mexico does tax retirement income, it also offers significant relief that can help stretch your savings further.
State-Friendly Benefits for Seniors
New Mexico allows residents aged 65+ to exempt up to $8,000 of retirement income, such as pension income, IRA distributions, and Social Security—depending on your adjusted gross income (AGI) and filing status. For many retirees, this deduction can significantly reduce taxable income.
Income thresholds matter
- Single filers: AGI must be $28,500 or less
- Married filing jointly: AGI must be $51,000 or less
- Married filing separately: AGI must be $25,500 or less
Above these levels, the deduction phases out, so planning ahead is key.
Social Security Exemptions
Good news—most seniors no longer pay tax on their Social Security benefits. As of 2022, New Mexico exempts these benefits for single filers with incomes under $100,000 and joint filers under $150,000. If your income is higher, a portion of your benefits may still be taxed, but many low- and moderate-income seniors owe no state tax on that income.
Medical Expense Credits
If you or your spouse incur unreimbursed medical expenses exceeding $28,000, New Mexico offers a refundable medical care credit worth up to $2,800. This can provide meaningful relief during years with high healthcare costs—especially important for seniors dealing with chronic conditions or ongoing treatment.
Read Also: Understanding the Nebraska Extra Standard Deduction for Seniors Over 65
Property Tax Rebate for Seniors
For low-income seniors—even renters—New Mexico offers a Property Tax Rebate of up to $250, providing additional relief for homeowners or those paying rent. Eligibility depends on income being below a certain threshold, making it accessible to many retirees on tight budgets.
State Income Tax Overview
New Mexico has a progressive income tax ranging from 1.7% to 5.9%, depending on income. While it’s not as tax-free as some states, the combination of retirement deductions, exemptions, and credits can significantly reduce or even eliminate your taxable income.
Why Seniors Should Take Advantage
- Lower your tax burden on fixed retirement income.
- Maximize cash flow, especially if living on a tight budget.
- Plan for healthcare costs using the medical expense credit.
- Reduce housing expenses through the property tax rebate.
Next Steps for Seniors
- Review your 1099s and pension statements to identify retirement income.
- Check your AGI and filing status to confirm eligibility for the $8,000 exemption.
- Track your medical expenses if they approach or exceed the $28,000 threshold.
- File for the property tax rebate if you meet income requirements.
What’s your experience been like navigating senior tax deductions in New Mexico? Share your tips, dilemmas, or questions in the comments over at ibwhsmag.com—your insight could help fellow retirees maximize their benefits!
