New Mexico taxes capital gains at 5.9%. Combined with federal taxes, your effective rate on a home sale could reach 24.7%.
NM State Rate
5.9%
Top marginal rate; 40% deduction available
Federal Rate
15%
Most common long-term bracket
Combined Effective
24.7%
On $150K taxable gain (example)
After the $250K/$500K exclusion, here's what a typical seller might owe.
If New Mexico is where your primary residence is located and you've lived there at least 2 of the last 5 years, you can exclude up to $250K (single) or $500K (married filing jointly) of your capital gain from both federal and state taxes.
Investment and rental properties in New Mexico don't qualify for the exclusion. You'll owe 5.9% state tax plus federal tax on the full gain, plus 25% depreciation recapture on any depreciation claimed.
In New Mexico, homes sold in January sell for 11% more than those sold in August (-7%). Timing your sale right can offset a significant portion of your tax bill.
Capital gains tax rates on home sales in New Mexico and nearby states.
| State | Rate | Tax on $150K Gain | Notes |
|---|---|---|---|
Texas0% | 0% | $0 | No state income tax |
| 2.5% | $3,750 | Flat tax rate | |
| 4.4% | $6,600 | Flat tax rate | |
| 4.65% | $6,975 | Flat tax rate | |
| 4.75% | $7,125 | Top marginal rate | |
New MexicoYou | 5.9% | $8,850 | Top marginal rate; 40% deduction available |
Selling in Texas instead of New Mexico would save $8,850 in state tax on a $150K gain.
New Mexico taxes capital gains at rates up to 5.9% but offers an important 40% deduction on net capital gains, effectively reducing the rate to approximately 3.5%.
This 40% deduction is one of the most generous capital gains breaks among states that tax investment income.
Santa Fe and Albuquerque drive the state's most expensive markets. Santa Fe's art community and second-home market generate significant luxury transactions.
For investment property, the 40% deduction is particularly valuable, as these sales don't benefit from the federal $250K/$500K exclusion.
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