HB 252: New Mexico Bill Restructures Tax Brackets and Targets Capital Gains

HB 252: New Mexico Bill Restructures Tax Brackets and Targets Capital Gains

February 29, 2024

New Mexico’s sweeping tax omnibus bill passed their State House and Senate in mid-February and included a restructuring of personal income tax brackets, changes to numerous tax credits and exemptions, and a significant update to New Mexico’s capital gains deductions. The Governor has until March 6th to approve the legislation.

New Mexico House Bill 252

House Bill 252 (HB 252) includes a flood of amendments aimed at putting millions into the New Mexico economy while concurrently trying to circumvent the 2023 tax bill situation where New Mexico’s Governor Michelle Luhan Grisham line-item vetoed many provisions she didn’t support.

Upon final approval of New Mexico’s 2024 tax bracket bill, the simple five-page House Bill 252 had morphed into a challenging 161-page document that contains everything from school supply deductions for public school teachers to angel investment tax credits. The proposed tax brackets and rates withstood the bill’s amendments and came through in the final signed bill as originally written.

New Mexico’s Personal Tax Brackets

New Mexico’s personal income tax brackets are not indexed to inflation, which creates a greater burden on taxpayers as their income increases over time. HB 252’s new tax structure would decrease taxes for all taxpayers with rate decreases targeted at the lowest income earners.

The existing marriage penalty remains, with married filers subject to higher income tax brackets sooner than they would occur if the income was filed separately by single filers. The new tax brackets would become effective in 2025 if the bill is signed by the Governor.

Capital Gains Deduction Changes

Also, effective beginning in 2025, the personal income tax deduction limit for capital gains would change from the greater of $1,000 or 40% of the taxpayer’s net capital gain income to the greater of $2,500 or 40% up to $1 million of capital gain income from the sale of a New Mexico business. This change is expected to annually generate over $60 million in revenue for New Mexico beginning in fiscal year 2026.

Prepare for Tax Changes

Complicated tax bills in New Mexico and elsewhere can significantly impact tax planning efforts for both individuals and businesses. REDW’s State and Local tax professionals are here to help you stay ahead of the curve by reviewing pending legislation and analyzing its impact on the constituents affected.

Reach out to us today to schedule a consultation to better understand your tax obligations and the tax minimization strategies available to you.

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