Estate and Inheritance Taxes by State, 2024
In addition to the federal estate tax, with a top rate of 40 percent, 12 states and DC impose additional estate taxes, while six states levy inheritance taxes.
7 min read
New Mexico | #31 Overall
New Mexico‘s tax system ranks 31st overall on the 2025 State Tax Competitiveness Index. New Mexico has a graduated state individual income tax with a top rate of 5.9 percent. Unusually, New Mexico’s corporate tax rate is also graduated, with rates ranging from 4.8 percent to 5.9 percent, and not indexed for inflation.
New Mexico also has a 4.875 percent tax on sales, with an average combined state and local rate of 7.62 percent. As a hybrid between an ordinary sales tax and a gross receipts tax, this tax does not apply to all intermediate transactions like a pure gross receipts tax but does apply to many more business inputs than are included in a typical sales tax, including manufacturing machinery and research and development (R&D) equipment. When this gross receipts-like tax applies to business-to-business transactions, it causes tax pyramiding throughout the supply chain, hampers investment, and negatively affects low-margin businesses.
The state’s corporate income tax also features a throwback rule, which exposes in-state businesses to additional tax when they sell into other states with which they do not have nexus, discouraging some businesses from locating operations in New Mexico. The state conforms to the federal treatment of capital investment under its corporate income tax, but with federal full expensing provisions currently phasing out, New Mexico has an opportunity to make its first-year expensing provisions permanent to avoid the erosion of this pro-investment provision.
| Category | Rank | Rank Change | Score |
|---|---|---|---|
| Overall | 31 | 1 | 5.02 |
| Corporate Taxes | 22 | 4 | 5.35 |
| Individual Income Taxes | 37 | 0 | 4.73 |
| Sales Taxes | 41 | -1 | 4.01 |
| Property Taxes | 2 | 0 | 6.45 |
| Unemployment Insurance Taxes | 16 | 2 | 5.40 |
- Learn more about New Mexico Taxes
-
Share your state results
Compare Neighboring States
Tax Data by State
Get facts about taxes in your state and around the U.S.
More on New Mexico
Premium Cigar Taxes by State, 2024
Over 500 million premium cigars were sold in the United States in 2023. With each sale comes a complex tax landscape.
4 min read
Confronting the New Property Tax Revolt
Policymakers can and should address taxpayers’ legitimate grievances about out-of-control property tax bills, but they should do so without upending a system of taxation that is more efficient, fair, and pro-growth, and better suited to municipal finance, than any of the alternatives.
39 min read