Many people planning to retire use the presence or absence of a state income tax as a litmus test for a retirement destination. This is a serious miscalculation since higher sales and property taxes can more than offset the lack of a state income tax. The lack of a state income tax doesn’t necessarily ensure a low total tax burden. States raise revenue in many ways including sales taxes, excise taxes, license taxes, income taxes, intangible taxes, property taxes, estate taxes and inheritance taxes. Depending on where you live, you may end up paying all of them or just a few. Following are the taxes you can expect to pay if you retire in New Mexico:
Sales TaxesGross Receipts Tax: 5.125% (prescription drugs exempt); county and city taxes may add another 3.56%. Certain food and medical expenses are exempt. Gasoline Tax: 18.9 cents/gallon Diesel Fuel Tax: 22.8 cents/gallon
Cigarette Tax: $1.66/pack of 20
Personal Income TaxesTax Rate Range: - Low -1.7%; High – 5.3% Income Brackets: Four. Lowest – $5,500; Highest – $16,000 (The tax brackets reported are for a single individual. For married individuals filing jointly, the same rates apply for income under $8,000 to over $24,000. Married households filing separately pay the tax imposed on half the income.) Personal Exemptions: Single – $3,650; Married – $7,300; Dependents – $3,650. New Mexico allows personal exemptions or standard deductions as provided in the Internal Revenue Code. Additional Exemptions: Taxpayer or spouse 65 or older – up to $10,900 deduction each from taxable income. An additional tax exemption of up to $2,500 is allowed for low- and middle-income taxpayers. Standard Deduction: (2012) Single – $5,950; Married filing jointly – $11,900 Same as federal
Medical/Dental Deduction: Credit of 3% of unreimbursed prescription drug expenses to maximum of $150 per individual or $300 per return. Also, if you or your spouse are age 65 and over and have unreimbursed or uncompensated medical care expenses of $28,000 or more for yourself, your spouse or dependents during the tax year, you are eligible for a $3,000 exemption and a credit of $2,800.
Federal Income Tax Deduction: None Retirement Income Taxes: The state offers a low- and middle income exemption. The maximum exemption is $2,500. To qualify, the amount on line 7 of the state income tax form must be equal to or less than $36,667 (single), $27,500 (married filing separately), or $55,000 (married filing jointly. A deduction also applies for those 65 and older if your adjusted gross income is not over $51,000 for a joint return, $28,500 for a single taxpayer, or $25,500 for a married taxpayer filing separately. Retired Military Pay: See above. Military Disability Retired Pay: Retirees who entered the military before Sept. 24, 1975, and members receiving disability retirements based on combat injuries or who could receive disability payments from the VA are covered by laws giving disability broad exemption from federal income tax. Most military retired pay based on service- related disabilities also is free from federal income tax, but there is no guarantee of total protection. VA Disability Dependency and Indemnity Compensation: VA benefits are not taxable because they generally are for disabilities and are not subject to federal or state taxes. Military SBP/SSBP/RCSBP/RSFPP: Generally subject to state taxes for those states with income tax. Check with state department of revenue office.
Property TaxesAll property, whether real or personal, is subject to state and local property taxes. Rates vary substantially and depend on property type and location. The statewide weighted average rates, i.e., total obligations/total net taxable value, are about $26.47 for residential property. Assessors usually determine market value by the sales-comparison approach which matches a property’s value to that of similar properties. The valuation of a residence that did not change hands in the prior year may not increase by more than 3% annually. One-third of the property’s market value (assessment) is its taxable value. The taxable value may be further reduced by exemptions of $2,000 each of heads of house holds and $4,000 for veterans.
There is a property tax rebate for residents age 65 and older. Their modified gross income cannot exceed $18,000 for the tax year and they cannot have been claimed as a dependent on another taxpayer’s return. Homeowners 65 and older who earn $18,000 ($25,000 in Sandoval County) or less are eligible for a credit of up to $250 (married filing jointly) or $125 for single taxpayers. Call 505-827-0870 for details.
For details on property taxes, refer to
http://www.tax.newmexico.gov/All-Taxes/Pages/Property-Tax.aspx.
Inheritance and Estate TaxesThere is no inheritance tax but an inheritance may be reflected in a taxpayer’s modified gross income and taxed that way. The estate tax is related to federal estate tax collection. It applies to the New Mexico portion of the net estate as a proportionate share of the federal credit for state estate taxes. The net estate located in New Mexico of a nonresident is also taxable as a fraction of the federal credit.
For further information, visit the New Mexico Taxation and Revenue Department site
http://www.tax.newmexico.gov/Pages/TRD-Homepage.aspx. [Source:
http://www.retirementliving.com Jul 2012 ++]
Topic: Tax Burden for New Mexico Retirees: (Read 544 times)
