New Mexico retired pay
Is military retirement taxed in New Mexico?
Partly taxed
$30,000 Per Retiree or Survivor.
Partly. New Mexico exempts up to $30,000 of armed forces retirement pay for each qualifying retiree, a level reached in tax year 2024, and since tax year 2025 the surviving spouse of an armed forces retiree can claim the same $30,000. Pay above $30,000 is taxed at New Mexico's graduated rates, which top out at 5.9%.
- The law
- Section 7-2-5.13 NMSA 1978
- Current rule since
- tax year 2024 ($30,000; $10,000 for 2022 and $20,000 for 2023); surviving spouses and no end date from tax year 2025 (HB 252, Laws 2024, Chapter 67, Section 32)
- Where you claim it
- Schedule PIT-ADJ, line 24 (Exemption for armed forces retirement pay); the line 28 total goes to Form PIT-1, line 15
Read on New Mexico’s own sources October 9, 2026
What New Mexico’s rule is worth on your retired pay
Enter your annual taxable retired pay (box 2a of your DFAS or Coast Guard 1099-R). The rate starts at New Mexico’s 4.9% rate on 2025 taxable income around $75,000 (single); the top 5.9% starts over $210,000 for tax year 2025; change it to your own bracket if you know it.
One rate applied to the whole amount, not New Mexico’s full return: brackets, other income, deductions and credits change the real figure. Use it to compare, then check the state’s own form instructions.
How it works in New Mexico
Line 24 of the 2025 Schedule PIT-ADJ takes the smaller of your armed forces retirement pay included in income or $30,000. Lines 7 through 27 add up on line 28, which carries to Form PIT-1, line 15.
Each qualifying spouse on a joint return claims a separate $30,000. The instructions do not say whether one spouse's unused room can shelter the other's pay, so read each $30,000 as covering its owner's retired pay: with assumed retired pay of $40,000 and $22,000, the couple then exempts $52,000 and $10,000 remains taxable.
On an assumed $36,000 pension, $30,000 is exempt and $6,000 is taxed. For a single retiree whose other income puts taxable income in the 4.9% bracket ($66,500 to $210,000 for tax years from 2025), the exemption saves about $1,470 a year. The 5.9% top rate starts above $210,000 single or $315,000 joint.
Section 7-2-5.13 defines an armed forces retiree as a former member who qualified by years of service or by disability to separate from military service with lifetime benefits. The statute sets no minimum age.
Other retiree lines sit beside line 24 on the same schedule: line 13, an exemption of up to $8,000 per person for those 65 or older or blind, scaled by filing status and AGI, and line 25, which exempts Social Security when federal AGI is no more than $100,000 single or $150,000 joint. A qualifying retiree can claim all three.
Survivor Benefit Plan annuities
Covered since tax year 2025. HB 252 (Laws 2024, Chapter 67, Section 32) added the surviving spouse of an armed forces retiree to § 7-2-5.13, so a surviving spouse can exempt up to $30,000. The 2025 PIT-ADJ instructions do not name the Survivor Benefit Plan, and for 2022 to 2024 the exemption was written for retirees only (read October 9, 2026).
Active-duty pay in New Mexico
Exempt. Active duty pay included in federal AGI is deducted on Schedule PIT-ADJ, line 17, and the department's personal income tax FAQ says active-duty income of armed forces members is exempt from New Mexico personal income tax.
What trips New Mexico retirees up
- The amount climbed in steps: $10,000 for 2022, $20,000 for 2023 and $30,000 from 2024 under Laws 2022, Chapter 47, Section 6. An amended return uses the figure for the year being fixed.
- Until HB 252, the exemption ended after tax year 2026 and did not reach surviving spouses. Section 32 of that bill made it permanent, added surviving spouses and renamed military retirement pay as armed forces retirement pay, all for tax years beginning on or after January 1, 2025.
- Laws 2024, Chapter 67 rebuilt the brackets for tax years from 2025: the bottom rate fell from 1.7% to 1.5% and a 4.3% bracket was added, while 5.9% stayed the top rate. Savings worked out with the 2021 to 2024 tables will be slightly off.
Federal side: DFAS reports retired pay on Form 1099-R, and the IRS taxes it as a pension. VA disability compensation is not taxable income under federal law (IRS Publication 525). The SCRA’s tax-home rule (50 U.S.C. § 4001) protects servicemembers on orders, not retirees, so where a retiree lives decides which state taxes the pension. Compare every state on the 51-state ledger. New Mexico’s other servicemember protections are on the New Mexico SCRA page.
Frequently asked questions
Does New Mexico tax military retirement?
Only above $30,000 per retiree. Section 7-2-5.13 NMSA 1978 lets an armed forces retiree exempt up to $30,000 of armed forces retirement pay included in net income, and the 2025 PIT-ADJ instructions put it on line 24 (read October 9, 2026). The amount was $10,000 for 2022, $20,000 for 2023 and $30,000 from 2024, and HB 252 of 2024 removed the original end date after tax year 2026. Pay above $30,000 is taxed at graduated rates from 1.5% to 5.9% for tax years from 2025.
Is SBP taxed in New Mexico?
Up to $30,000 of it is exempt from tax year 2025 on. HB 252 (Laws 2024, Chapter 67, Section 32) added the surviving spouse of an armed forces retiree to § 7-2-5.13, effective January 1, 2025, according to the change notes in the 2025 PIT-ADJ instructions. The surviving spouse claims it on PIT-ADJ, line 24. For 2022 through 2024 the statute covered only the retiree, so an amended return for those years cannot add it. The instructions do not mention the Survivor Benefit Plan by name.
Can both spouses take the New Mexico armed forces retirement exemption?
Yes. The 2025 PIT-ADJ instructions say that when a couple files jointly and both spouses qualify, each qualifying armed forces retiree may claim $30,000. They do not say whether a spouse with less than $30,000 can pass the unused part to the other spouse. Applying each $30,000 only to its owner's pay, a couple with assumed retired pay of $40,000 and $22,000 exempts $30,000 plus $22,000, and $10,000 stays taxable. Both amounts go on line 24 of the joint PIT-ADJ, and the PIT-ADJ total goes to PIT-1, line 15.
Does the New Mexico military retirement exemption expire?
Not anymore. The 2022 law that created it (Laws 2022, Chapter 47, Section 6) set the $30,000 level only for tax years 2024 through 2026. HB 252 in 2024 rewrote § 7-2-5.13 with no end year, for tax years beginning on or after January 1, 2025, per the 2025 PIT-ADJ instructions. The legislature can still change it, so check the PIT-ADJ instructions for the year you file.
Sources, read October 9, 2026
- Instructions for 2025 PIT-ADJ, New Mexico Schedule of Additions, Deductions, and Exemptions (New Mexico Taxation and Revenue Department)
- 2025 PIT-ADJ, New Mexico Schedule of Additions, Deductions, and Exemptions (New Mexico Taxation and Revenue Department)
- HB 252, 2024 Regular Session, final version, Section 32 (New Mexico Legislature)
- HB 163, 2022 Regular Session, final version, Section 6 (New Mexico Legislature)
- Personal Income Tax Rates, file PIT rates_2005_2025 (New Mexico Taxation and Revenue Department)
- Personal Income Tax Information Overview (New Mexico Taxation and Revenue Department)
Heads up: SCRA Saver publishes general information, not legal or financial advice. Laws change and every situation differs. Confirm details with your installation legal assistance office (free for service members) or a licensed professional.