Complete Guide to New Mexico LLC Taxes in 2025
New Mexico stands out as one of the most LLC-friendly states in the nation, combining strong privacy protections with zero annual reporting requirements and no franchise tax. With graduated income tax rates from 1.7% to 5.9% and a unique Gross Receipts Tax system that replaces traditional sales tax, the Land of Enchantment offers a distinctive tax landscape for LLC owners. This comprehensive guide covers everything you need to know about operating an LLC in New Mexico.
How New Mexico Taxes LLCs
New Mexico treats LLCs as pass-through entities for state tax purposes. The LLC itself does not pay New Mexico income tax. Instead, all profits and losses pass through to the individual members, who report their share on their personal New Mexico income tax returns using Form PIT-1.
For a single-member LLC, income flows to Schedule C of the owner's federal return and then to Form PIT-1. For a multi-member LLC, the LLC files a New Mexico information return and each member receives a Schedule K-1. New Mexico does not impose a franchise tax, privilege tax, or any entity-level tax on LLCs.
Key Point: New Mexico is one of only a handful of states that requires no annual report and no annual fee for LLCs. Once formed, your LLC has zero ongoing state compliance costs beyond filing tax returns -- the cheapest long-term LLC maintenance in the nation.
New Mexico Income Tax Brackets (2025)
| Taxable Income (Single) | Taxable Income (MFJ) | Tax Rate |
|---|---|---|
| $0 - $5,500 | $0 - $8,000 | 1.7% |
| $5,501 - $11,000 | $8,001 - $16,000 | 3.2% |
| $11,001 - $16,000 | $16,001 - $24,000 | 4.7% |
| Over $16,000 | Over $24,000 | 5.9% |
The top rate of 5.9% kicks in at low thresholds, meaning most LLC owners with meaningful income pay close to 5.9% on the bulk of their earnings.
New Mexico Gross Receipts Tax (GRT)
The Gross Receipts Tax is New Mexico's equivalent of sales tax but much broader. It applies to the seller's gross receipts from selling property and services in the state. The combined rate ranges from 5.0% to 9.3% depending on location (Albuquerque ~7.875%, Santa Fe ~8.4375%).
- Broader than sales tax: GRT applies to services as well as goods -- consulting, construction, IT, and more
- Deductible against income: GRT paid is deductible as a business expense on federal and state returns
- Can be passed to customers: Most businesses add GRT as a line item on invoices
- Registration required: Obtain a CRS identification number from NM Taxation and Revenue Department
Tax Tip: Service-based LLCs must factor GRT into pricing since it applies to services unlike most states' sales taxes. LLC members earning above $50,000-$60,000 should evaluate S-Corp election to save on self-employment tax. Use our S-Corp Tax Calculator to compare.
No Annual Report Requirement
New Mexico is one of the very few states with no annual report or biennial report for LLCs. No annual fee, no periodic filing, no renewal. Your LLC stays in good standing indefinitely as long as you maintain a registered agent. Compare this to California ($800+/year), Massachusetts ($500/year), or Florida ($138.75/year).
Federal Taxes for New Mexico LLC Owners
- Self-Employment Tax (15.3%): Social Security (12.4% up to $176,100) + Medicare (2.9% on all earnings) + 0.9% additional Medicare surtax above $200,000/$250,000
- Federal Income Tax: 10% to 37% based on filing status and bracket rates for 2025
- QBI Deduction: Up to 20% deduction on qualified business income under Section 199A
New Mexico LLC Filing Deadlines
| Filing Type | Deadline | Extension |
|---|---|---|
| Single-Member LLC (PIT-1) | April 15 | October 15 |
| Multi-Member LLC (PTE return) | March 15 | September 15 |
| Gross Receipts Tax (CRS-1) | 25th of month after period | None |
| Estimated Payments | Apr 15, Jun 15, Sep 15, Jan 15 | None |
New Mexico LLC Formation Costs
- Articles of Organization: $50 filing fee
- Registered Agent: Required; $50-$150/year commercial
- Operating Agreement: Not legally required but recommended
- EIN: Free from the IRS
- Annual Report Fee: $0 (none required)
New Mexico LLC Privacy Advantages
New Mexico is widely recognized as a top state for LLC privacy. Member and manager names are not required on public filings. Only the organizer's name and registered agent information appear on public records. Combined with no annual report, NM offers the strongest LLC privacy protection of any US state.
New Mexico vs. Neighboring States for LLC Taxes
| State | Income Tax Rate | Annual Fee | Entity Tax |
|---|---|---|---|
| New Mexico | 1.7-5.9% | $0 | None (GRT applies) |
| Texas | 0% | $0 | Franchise tax 0.375-0.75% |
| Arizona | 2.5% flat | $0 | None |
| Colorado | 4.4% flat | $10 | None |
| Oklahoma | 4.75% flat | $25 | None |
Pass-Through Entity Tax Election (PTET)
New Mexico has enacted a PTET election allowing eligible pass-through entities to pay state income tax at the entity level, bypassing the federal $10,000 SALT deduction cap and potentially saving thousands in federal taxes for higher-income LLC owners.
Common New Mexico LLC Tax Mistakes
- Forgetting GRT registration: Register for your CRS number before conducting business
- Not collecting GRT on services: Unlike most states, NM's GRT applies to services
- Assuming no annual obligations: No annual report doesn't mean no tax filing obligations
- Ignoring local GRT rates: Rates vary significantly by location
- Missing estimated payments: NM penalizes underpayment if you owe $1,000+
- Not evaluating S-Corp election: Members with net income above $50K-$60K should evaluate S-Corp status
New Mexico Business Incentives
- High-Wage Jobs Tax Credit: 8.5% of wages for new high-wage jobs for up to 4 years
- Technology Jobs Tax Credit: Up to 10% of qualified R&D expenditures
- Angel Investment Tax Credit: 25% credit for qualified investments in NM businesses
- Film Production Tax Credit: 25-30% of direct production expenditures
- Rural Jobs Tax Credit: Additional credits for job creation in rural areas
New Mexico Conformity Note: New Mexico uses federal AGI as the starting point for state taxable income. Review Form PIT-1 instructions for NM-specific modifications and ensure you're claiming all available deductions and credits.
Understanding New Mexico's Tax Environment for Small Businesses
New Mexico's tax landscape for LLC owners goes beyond just the income tax rates. The state operates one of the most unique tax systems in the nation through its Gross Receipts Tax, which fundamentally differs from the sales tax used in most other states. Understanding this distinction is critical for LLC owners who want to accurately estimate their total tax burden and price their products or services competitively.
The GRT is levied on the seller, not the buyer, which has important implications for how businesses report and remit taxes. While most businesses pass the GRT through to customers as a line item on invoices (similar to how sales tax appears on receipts in other states), the legal incidence of the tax falls on the business. This means that even if a customer refuses to pay the GRT surcharge, the business remains responsible for remitting the full amount to the Taxation and Revenue Department.
New Mexico LLC Operating Agreement Requirements
While New Mexico does not legally require an LLC operating agreement, having one is strongly recommended for several reasons. An operating agreement establishes the internal rules governing your LLC, including member ownership percentages, profit and loss allocation, management structure, voting rights, and dissolution procedures.
Without an operating agreement, your LLC will be governed by the New Mexico Limited Liability Company Act's default provisions, which may not align with your business objectives. For example, the default rules provide for equal profit sharing regardless of capital contributions, which could create disputes among members with different investment levels.
Key provisions to include in your NM LLC operating agreement:
- Capital contributions: How much each member invests initially and how future contributions are handled
- Profit and loss allocation: The percentage each member receives (may differ from ownership percentages)
- Management structure: Member-managed vs. manager-managed, and the authority of each role
- Distribution timing: When and how profits are distributed to members
- Tax elections: Who has authority to make tax elections (S-Corp, PTET, etc.)
- Transfer restrictions: Rules governing the sale or transfer of membership interests
- Dissolution procedures: Events that trigger dissolution and how assets are distributed
Estimated Tax Payment Strategies for NM LLC Owners
New Mexico requires estimated tax payments if you expect to owe $1,000 or more when you file your annual return. For LLC owners, managing quarterly estimated payments across federal, state, and GRT obligations requires careful planning to avoid underpayment penalties.
The quarterly payment schedule for New Mexico mirrors the federal schedule: April 15, June 15, September 15, and January 15 of the following year. However, GRT payments follow a different schedule based on your reporting period (monthly, quarterly, or semi-annually), which depends on your total GRT liability.
A strategic approach to estimated payments involves creating a quarterly projection spreadsheet that tracks your income, expenses, federal tax liability, state tax liability, and GRT separately. This helps ensure you are making adequate payments to both the IRS and the New Mexico Taxation and Revenue Department throughout the year rather than facing a large balance due at filing time.
New Mexico Business Licenses and Permits
Beyond tax registration, New Mexico LLC owners should be aware of additional licensing requirements that may apply to their business. The state does not require a general business license, but specific industries and activities require specialized permits. Examples include professional licenses for attorneys, CPAs, and medical practitioners; contractor licenses through the Construction Industries Division; food service permits; and liquor licenses.
At the local level, municipalities like Albuquerque, Santa Fe, and Las Cruces may require separate business registration or licenses. Check with your local city or county clerk's office for specific requirements in your area. Operating without required permits can result in fines, penalties, and potential liability issues.
S-Corp Election Analysis for New Mexico LLCs
The S-Corp election is one of the most powerful tax optimization strategies available to New Mexico LLC owners. By electing S-Corp status, you can split your LLC income into two categories: a reasonable salary (subject to self-employment tax) and distributions (not subject to SE tax). This can save thousands of dollars annually for LLC owners with net income above $50,000-$60,000.
However, the S-Corp election comes with additional compliance requirements and costs that must be weighed against the tax savings. These include running payroll for yourself (W-2, withholding, quarterly payroll tax deposits), filing Form 1120-S (corporate tax return) in addition to your personal return, and maintaining reasonable compensation documentation. For New Mexico specifically, the state generally follows the federal S-Corp election, so no separate state election is needed.
A rough rule of thumb: if your net LLC income exceeds $60,000 and the payroll compliance costs (typically $500-$2,000/year) are less than the SE tax savings, S-Corp election makes financial sense. Use our calculator above to model different scenarios for your specific situation.