What You Need to Know
- A bill under consideration would eliminate the tax for retirees with under $100,000, or couples with under $150,000, in annual income.
- New Mexico is one of 12 states that levy their own tax on Social Security benefits.
- The bill must clear the Senate Finance Committee by noon Thursday.
New Mexico may be soon stop taxing Social Security benefits for certain seniors after a compromise was passed by the Senate Tax Committee late last week.
The state is one of 12 that still tax Social Security at different income levels. However, several states that still tax Social Security are making changes on either increasing the age of taxation, phasing out the taxes or eliminating the tax altogether.
The compromise reached last week in New Mexico will remove taxes on Social Security for individuals with incomes up to $100,000 and up to $150,000 for couples filing jointly. The bill, SB5, was passed by the Senate Tax Committee by a 9-1 vote. The House bill, HB163, has identical provisions.
The state’s current tax includes all Social Security benefits in the taxable income base, though the state provides a deduction that reduces the taxability of all retirement income.
If passed, the bill will reduce state revenue just over $84 million a year, according to Fred Nathan, executive director of Think New Mexico, a nonpartisan research group focused on financial issues including financial literacy and pensions.