S-Corporation Income Tax
New Mexico recognizes the federal S-election, and New Mexico S corporations are not required to pay tax to the state. However, individual S corporation shareholders will owe tax on their share of the corporation’s income
S corporations are subject to New Mexico franchise tax of $50, due on the 15th day of the third month after year-end.
LLC/Partnership Income Tax
LLCs and partnerships are not required to pay income tax to New Mexico. Instead, income from the business is distributed to individual LLC members or partners, who then pay New Mexico income tax on that amount with their personal return.
C-Corporation Income Tax
New Mexico taxes C corporation net income at a series of marginal rates:
total net income not over $500,000 = 4.8% tax
total net income over $500,000 but not over $1,000,000 = $24,000 plus 6.4% of net income over $500,000; and
total net income over $1,000,000 = $56,000 plus 7.6% of net income over $1,000,000.
C corporations are also subject to New Mexico franchise tax of $50. Tax returns are due on the 15th day of the third month following business’ year-end.
Corporate Franchise/Privilege Tax
New Mexico’s franchise tax is a flat annual fee of $50 that must be paid by all New Mexico corporations, including S corporations.
Individual Income Tax
New Mexico generally conforms to the Internal Revenue Code on a rolling basis, and therefore adopts most federal provisions, unless otherwise modified.
The starting point for computing New Mexico's personal income tax liability is the federal adjusted gross income.
You can use either your federal itemized deduction or standard deduction, whichever benefits you more. The standard deduction is equal to the federal standard deduction for 2020. Here are the amounts.
Single - $12,400
Married Filing Combined - $24,800
Married Filing Separate - $12,400
Head of Household - $18,650
Qualified Widow(er) - $24,800
Personal and dependent exemptions are not offered.
They do not conform to the Internal Revenue Code (IRC) section 199A, also known as the QBI deduction.
CARES Act Guidance
Rolling conformity states generally automatically adopt changes to the IRC as they are enacted at the federal level, unless otherwise modified. New Mexico specifically does not conform to the IRC Section 172 of the CARES Act regarding business net operating loss (NOL) provisions. Instead, New Mexico will retain its treatment of business NOLs, not allowing any carryback and allowing only a 20-year carryforward.
If your business was formed or is located in another state, but generates income in New Mexico, it may be subject to New Mexico taxes. The rules for taxation of multistate businesses, including what constitutes nexus with a state for the purpose of various taxes, are complicated. If you run such a business, you should consult with a tax professional.