Active-duty and reserve pay
Active-duty military pay is exempt.
An E-5 with over 6 years of service earns $49,320 a year in basic pay. In New Mexico, that pay is normally excluded from state income tax. Housing and food allowances are never taxed by any state.
Military retired pay
Up to $30,000 of military retired pay is exempt for tax years 2024 through 2026.
Your state of legal residence decides
Military pay is taxed by your state of legal residence, usually the state you lived in when you joined or one you later adopted by changing your records, not by the state where you are stationed. This comes from the Servicemembers Civil Relief Act. Spouses can choose to use the member's state of legal residence for their own income too.
See your total pay with state tax
Questions
Does New Mexico tax military pay?
New Mexico does not tax active-duty military pay. Active-duty military pay is exempt.
Does New Mexico tax military retirement pay?
Up to $30,000 of military retired pay is exempt for tax years 2024 through 2026.
Is BAH taxed in New Mexico?
No. BAH and BAS are not taxable income for federal or state tax in any state.
Which state taxes me if I am stationed in New Mexico?
Under the Servicemembers Civil Relief Act, your military pay is taxed only by your state of legal residence, not the state where you are stationed. If New Mexico is not your legal residence, New Mexico does not tax your military pay.