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$30,000 of Military Retirement Untaxed — and Under Current Law It Ends After 2026

New Mexico exempts armed forces retirement pay from state income tax on a rising scale: $10,000 for tax year 2022, $20,000 for 2023, and $30,000 for 2024 through 2026. UNDER CURRENT LAW THE EXEMPTION EXPIRES AFTER TAX YEAR 2026. Two bills to extend it in the 2026 session — HB 221 and SB 116 — died in committee. That does not mean it will not be extended later, but it does mean a retiree planning around New Mexico's tax treatment should not assume 2027 looks like 2026.

Verified August 27, 2026

What this benefit is

New Mexico exempts armed forces retirement pay from state income tax on a rising scale: $10,000 for tax year 2022, $20,000 for 2023, and $30,000 for 2024 through 2026. UNDER CURRENT LAW THE EXEMPTION EXPIRES AFTER TAX YEAR 2026. Two bills to extend it in the 2026 session — HB 221 and SB 116 — died in committee. That does not mean it will not be extended later, but it does mean a retiree planning around New Mexico's tax treatment should not assume 2027 looks like 2026.

What it's worth: $30,000 of retirement pay exempt for tax years 2024–2026

  • $10,000 for tax year 2022; $20,000 for 2023; $30,000 for 2024, 2025 and 2026.
  • UNDER CURRENT LAW THE EXEMPTION EXPIRES AFTER TAX YEAR 2026.
  • Two 2026-session bills to extend it, HB 221 and SB 116, DIED IN COMMITTEE.
  • It may still be extended in a later session. What we can say is that it is not extended now.
  • It applies to ARMED FORCES RETIREMENT PAY. No disability is required.
  • The saving depends on your retirement pay and New Mexico's rates.
  • Anyone deciding where to retire on the strength of this should check the current position before relying on it.

Who is entitled to it

  • You are in one of the groups this reaches.
  • You receive armed forces retirement pay.
  • New Mexico income tax.

Not sure whether that describes you?

Answer a few questions about this benefit specifically — we only ask what this one actually depends on, and we stop as soon as we know.

How to claim it

Deadline: With the annual New Mexico return; exemption sunsets after 2026
  1. 1Take the exemption on your New Mexico return for the tax year in question, up to the year's limit.
  2. 2Check which year you are filing for — the amount rose from $10,000 to $30,000 over three years.
  3. 3Before planning a move or a retirement date around this, check whether the sunset has been extended. It has not been as at August 2026.
  4. 4If you missed the exemption in 2022 or 2023, ask Taxation and Revenue about amending within the statutory period.
  5. 5Keep the retirement pay statements with your return.
Form
New Mexico personal income tax return
File with
New Mexico Taxation and Revenue Department
Annual
Claimed once a year.
Worth knowingStates are often described as tax-friendly to military retirees on the strength of an exemption with a sunset in it. New Mexico's is real, it is worth up to $30,000 a year, and as the law stands it does not survive 2026.

Sources

This finder provides an informational match, not a government eligibility determination. The responsible agency decides your application.