Commentary March 09, 2022 at 07:44 AM Share & Print
What You Need to Know
- Those whose income is less than $100,000 (single) or $150,000 (married, filing jointly) will no longer have to pay state taxes on benefits.
New Mexico on Tuesday joined a growing number of states that have reduced or eliminated taxes on Social Security benefits.
Gov. Michelle Lujan Grisham, a Democrat, signed House Bill 163, exempting individuals with less than $100,000 a year of income and couples earning less than $150,000 from state taxes on the government benefit.
The cut takes effect in tax year 2022.
Currently, New Mexico includes all Social Security benefits in the taxable income base, though the state provides a deduction that reduces the taxability of all retirement income. This has been in effect since 1990.
The new tax cut will save older adults in the state more than $84 million next year, according to a statement released by the governor’s office.
“New Mexicans, like all Americans, are feeling the pressure of rising costs,” said Grisham in the statement. “Coupled with the state’s robust current financial situation, there is no reason we shouldn’t be taking every action to cut costs for New Mexico seniors, families and businesses.”
New Mexico is one of 12 states that tax Social Security at some level. In late 2021, North Dakota eliminated the tax on Social Security benefits.
“This is meaningful tax relief that will put an average of $710 a year back in the pockets of 115,000 low and middle class seniors across New Mexico,” Fred Nathan Jr., founder and executive director of Think New Mexico, told in an email.
Sen. Michael Padilla of Albuquerque, a co-sponsor of the bill, told the Las Cruces Sun News when the bill passed the Legislature that with 49% of New Mexico’s foster children being raised by retired grandparents, the money lost to state coffers would be converted to spendable income for the greater benefit of the economy.
The bill is part of about $400 million in tax cuts to state residents and businesses.