What New Mexico residents actually pay
New Mexico taxes ordinary income at a top marginal rate of 5.9%. RSU settlement value, NSO exercise spread, and ESPP discount income all count as ordinary wages for this purpose and flow through the state's normal brackets.
Up to 40% of net capital gains deducted from state tax.
Federal AMT on the bargain element
Exercising ISOs and holding the shares creates AMT "preference income" equal to the spread between fair market value at exercise and your strike price. That's the bargain element. It doesn't show up on a W-2, and many people discover it only when their CPA calculates AMT in April.
Frequently asked
- Does New Mexico tax RSU income the same as wages?
- Yes. New Mexico treats RSU ordinary income as wages, taxable at the state's top marginal rate of 5.9%. Supplemental-wage federal withholding (22%, or 37% above $1M YTD) does not adjust for state withholding, so you often owe extra at filing.
- What happens if I exercise ISOs while living in New Mexico?
- New Mexico does not run a separate state AMT, so only federal AMT applies. You still need to model the bargain element carefully if you plan a cashless exercise-and-sell.
- I moved to New Mexico from another state. Who taxes my vesting RSUs?
- Most high-tax states (CA, NY, MA) source RSU ordinary income to workdays between grant and vest. If your grant pre-dates your New Mexico move, expect the old state to tax the portion of each tranche attributable to workdays earned there. New Mexico taxes the remainder.
- Can I reduce New Mexico taxes by timing my RSU sales?
- New Mexico gives preferential treatment to long-term capital gains. Holding RSU shares 12+ months past vest can produce both federal and state savings. Weigh concentration risk before using this as a reason to hold.
Related
- RSU taxes — New Mexico
- Capital gains tax — New Mexico
- QSBS — New Mexico
- Moving to or from New Mexico with unvested equity: trailing nexus rules — New Mexico
- RSU vesting schedules — New Mexico
- ESPP taxation — New Mexico
- NSO exercises and state tax — New Mexico
- 401(k) and retirement accounts — New Mexico
- Leaving New Mexico: how to cleanly break residency before a liquidity event — New Mexico
- New Mexico equity-comp overview