Understanding New Mexico Individual Income Tax for Non-Residents

Are you a non-resident working or earning income in New Mexico? Do you wonder how to navigate the state’s individual income tax system? This article is here to help you understand the ins and outs of New Mexico’s individual income tax for non-residents.

First things first, let’s clarify what it means to be a non-resident for tax purposes in New Mexico. Generally, you are considered a non-resident if you do not live in New Mexico for more than six months of the year. This distinction is crucial as it determines whether you are subject to New Mexico’s income tax on earnings derived from the state.

What Income is Subject to New Mexico Tax?

As a non-resident, the income you earn in New Mexico is subject to the state’s income tax. This includes income from employment, self-employment, rental properties, and other sources. However, not all income is taxable. Let’s break down the key types of income:

• Wages and Salaries: If you work in New Mexico, your wages and salaries are fully taxable.

• Self-Employment Income: Income from self-employment in New Mexico is also fully taxable.

• Rental Income: If you rent out property in New Mexico, the income is taxable.

• Dividends and Interest: Income from dividends and interest earned on investments in New Mexico is taxable.

• Capital Gains: Gains from the sale of property located in New Mexico are taxable.

What Income is Exempt from New Mexico Tax?

While most income is taxable for non-residents, there are some exceptions:

• Income from sources outside of New Mexico: If you earn income from sources outside of New Mexico, that income is generally not subject to New Mexico tax.

• Income from certain retirement accounts: Distributions from certain retirement accounts, like IRAs and 401(k)s, are exempt from New Mexico tax.

• Capital gains from property outside of New Mexico: Gains from the sale of property not located in New Mexico are not subject to New Mexico tax.

How to File New Mexico Income Tax as a Non-Resident

Filing your New Mexico income tax as a non-resident is a straightforward process. Here’s what you need to do:

1. Complete Form NM-5, Non-Resident Income Tax Return.

2. Calculate your New Mexico taxable income by subtracting the income you earned outside of New Mexico from your total income.

3. Apply the appropriate non-resident tax rate to your New Mexico taxable income.

4. Complete Schedule A to determine if you are eligible for any deductions or credits.

5. Pay any tax due or claim a refund if you overpaid.

Key Takeaways

Here’s a quick summary of the key points covered in this article:

• Non-residents working in New Mexico are subject to the state’s income tax on earnings derived from the state.

• Most income types are taxable, except for income from sources outside of New Mexico and certain retirement account distributions.

• Filing your New Mexico income tax as a non-resident involves completing Form NM-5 and applying the non-resident tax rate.

By understanding these basics, you can ensure that you comply with New Mexico’s individual income tax requirements as a non-resident.