New Mexico Retirement Guide: Tax-Friendly Living for Seniors

This article is a part of the 50 states retirement tax-planning series. View the series here.

By David Diller

New Mexico is emerging as a hidden gem for retirees, drawing both part-time “snowbirds” escaping harsher winters and full-time residents captivated by its mild climate, stunning landscapes and vibrant cultural heritage. With its renowned arts scene, abundant outdoor recreation and welcoming communities, the Land of Enchantment offers an ideal setting for easing into your golden years. When compared to other popular retirement destinations, New Mexico provides a compelling mix of tax advantages, lower property costs and a lifestyle that prioritizes affordability and quality of life.

The Cost of Living in New Mexico

Affordability is a key factor when choosing a retirement spot, and New Mexico excels in this area. The state boasts a cost of living driven by reasonable housing prices, low transportation costs and accessible food prices. As of January 2025, New Mexico’s median home price was $344,800 (according to Redfin), well below the national median price of $396,900 (according to NAR). This affordability, paired with tax benefits, allows retirees to stretch their savings further while enjoying a high quality of life in cities like Santa Fe, Albuquerque, Las Cruces or quieter towns like Taos.

Income Taxes: Relief for Retirees

New Mexico imposes a state income tax with progressive rates ranging from 1.5% to 5.9%, depending on income. However, it offers targeted relief for retirees that softens the impact. Those aged 65 or older can exempt up to $8,000 of income (single filers) or $16,000 (joint filers)—including pensions, retirement distribution, and investment income—if their adjusted gross income (AGI) is below $28,500 (single) or $51,000 (joint).

Social Security benefits are also partially exempt: fully untaxed if AGI is under $100,000 (single) or $150,000 (joint), with only a portion taxable above these thresholds. For example, a single 65-year-old retiree with $60,000 in income ($25,000 from Social Security, $20,000 from RMDs and $15,000 from a pension) could see their Social Security fully exempt and $8,000 deducted from other income, leaving $27,000 taxable and a state tax bill of roughly $900–$1,200—which is competitive compared to other states across the country.

Property Taxes: A Retiree’s Dream

Property taxes are a major consideration for retirees, and New Mexico stands out with an average rate of 0.74% of assessed value—among the lowest in the U.S. A $250,000 home incurs just $1,850 annually. Retirees aged 65 or older can take advantage of the Value Freeze Program, which caps the assessed value of a primary residence if income is below $42,900 (adjusted annually), shielding them from tax hikes due to rising property values. Additionally, the Property Tax Rebate provides up to $125 (or $250 for joint filers) for seniors with modified gross incomes below $16,000, and veterans can claim a $4,000 exemption (full exemption for 100% disabled vets). These benefits ensure predictable and affordable homeownership costs.

Gross Receipts Tax That Spares the Essentials

New Mexico’s state sales tax, known as the Gross Receipts Tax (GRT), starts at 4.875%. Local add-ons push the combined rate to 5.25%–9.44% (averaging 7.8%). New Mexico’s Gross Receipts Tax might sound daunting, but it’s designed with retirees in mind. Groceries? Exempt. Prescription drugs? Exempt. Even unprocessed agricultural goods like that fresh green chile you’ll fall in love with? Exempt. Unlike sales taxes in other states that hit every purchase, New Mexico’s GRT skips the essentials, letting you stretch your dollars on daily needs.

Estate Planning and Beyond

New Mexico stands apart as a retiree’s dream, being included in the states with zero estate and inheritance taxes—a powerful perk for those shaping their legacy. Unlike states like Oregon or Maryland, where estates over $1 million can face taxes up to 16%, New Mexico lets you pass on your wealth—whether it’s a $300,000 home in Las Cruces or a $1.5 million ranch near Santa Fe—without a penny shaved off from the state.

Lifestyle and Health Care: A Balanced Appeal

New Mexico’s climate ranges from sunny southern deserts to cooler northern mountains, offering retirees flexibility in choosing their ideal environment. Its smaller size ensures access to quality health care—Albuquerque and Santa Fe host top facilities, and rural areas are closer to providers than in many larger states. Medicaid expansion also supports low-income seniors, adding a safety net for health-related costs.

With its compelling mix of natural wonders and cultural sites, New Mexico offers something for everyone—from easy trails to more challenging backcountry adventures. Whether you’re strolling the gypsum dunes at White Sands or peering into ancient cliff dwellings at Bandelier, you’ll experience the truly enchanting landscapes that make New Mexico so special. By combining leisurely drives, gentle hikes or walks, cultural events and relaxing hot springs, retirees can discover the state’s beauty at their own pace, and whether you love art, nature, history or just a good meal with a view, New Mexico has plenty of comfortable, fulfilling activities to offer.

Why New Mexico Stands Out

New Mexico blends affordability, natural beauty, and tax advantages into a retiree-friendly package. Its progressive income tax with generous exemptions, rock-bottom property taxes, and no estate tax create a compelling case for retirees. The state’s lower overall cost of living, serene lifestyle, and accessible amenities make it a standout destination. Retirees should weigh income sources, property plans, and health needs—consulting a financial professional can help. In the Land of Enchantment, your golden years can be both financially secure and deeply fulfilling.

About the author: David Diller

Originally from Albuquerque, David earned his Masters in Accounting from the University of New Mexico in 2012 and CPA license in 2013. He discovered his passion for helping individuals learn about personal finance while teaching financial literacy at Central New Mexico Community College in 2019, which lead to a career working as a CERTIFIED FINANCIAL PLANNER professional™ (CFP®️) at RBC Wealth Management, assisting individuals and businesses with financial planning, investments and retirement. Active in the community through organizations like New Mexico Society of CPAs and Junior Achievement, David lives with his wife and two daughters, enjoying travel and time with family and friends.