New Mexico · families
Credits and breaks for New Mexico families: a quarter of the federal EITC, a check for every child, and the $4,000 dependent deduction
New Mexico pays families through refundable credits on Schedule PIT-RC rather than through deductions. What the Working Families Tax Credit is worth, how the Child Income Tax Credit pays something for every child at every income, the day-care credit and rebate with low income limits, the dependent deduction and exemption that cut taxable income, the no-cap 529 deduction, and why head-of-household filers do unusually well here. With a worked example of a single mother of two.
By Charles Trautman, EA, editor
Need to Know Tax · written from New Mexico Taxation and Revenue Department sources, November 3, 2026; updated November 12, 2026 after the election · not yet reviewed by a New Mexico practitioner
For a New Mexico family the return runs in two directions at once. Above the tax line the state cuts taxable income: the federal standard deduction flows through, $4,000 comes off for every dependent after the first, and a low- and middle-income exemption of up to $2,500 a person helps households under about $55,000. Below the tax line, on Schedule PIT-RC, the state pays out. The Working Families Tax Credit is 25% of the federal earned income credit. The Child Income Tax Credit pays a fixed amount per child, $637 at the lowest incomes and $26 at the highest for 2025, with the 2026 figures to come. Both are refundable: if they exceed the tax, the Department sends the difference. A family can owe no New Mexico tax at all and still receive a payment of a few thousand dollars. The credits are claimed on the return, so a family under the filing threshold has to file to get them.
What New Mexico does not do is also worth knowing from the start. There is no credit for K-12 tuition or school supplies, no credit for college tuition, no renter credit, and no deduction for child care beyond the small day-care credit on PIT-RC. The federal child tax credit, the federal dependent care credit and the federal education credits do not reduce New Mexico tax, because New Mexico starts from federal adjusted gross income and the federal credits are applied after it. The state’s help is concentrated in the lines described below.
The Working Families Tax Credit
The Working Families Tax Credit is New Mexico’s earned income credit. It is 25% of the federal earned income credit claimed on the same year’s Form 1040, entered on PIT-1 lines 25 through 25b, and it is refundable. A family whose federal EITC is $6,000 receives $1,500 from New Mexico. The rate rose from 20% to 25% beginning with tax year 2023 and has stayed there; the Department confirmed 25% for the 2026 filing season.
Two groups get the New Mexico credit even though the federal credit turns them away. A resident who files with an Individual Taxpayer Identification Number instead of a Social Security number, and who would qualify for the federal EITC in every other respect, computes the federal credit as if eligible and claims 25% of it. And a worker aged 18 to 24 with no qualifying child, who is too young for the federal childless credit, qualifies here. In both cases the New Mexico credit is figured on a federal credit that was never paid, so the computation is done on the New Mexico return from the federal tables.
The federal credit for 2026 tops out at $8,231 with three or more children, $7,316 with two, $4,427 with one and $664 with none, so the New Mexico credit tops out at about $2,058, $1,829, $1,107 and $166. Earned income means wages and self-employment income; investment income over the federal limit disqualifies the household from both credits.
The Child Income Tax Credit
Every qualifying child on a New Mexico return earns a credit, whatever the family’s income. “Qualifying child” has its federal meaning, so a child who qualifies the family for the federal child tax credit qualifies here. The amount per child is set by federal AGI, is indexed each year to inflation, and by law never goes down. The credit is refundable and is claimed on Schedule PIT-RC. It runs through tax year 2031.
| Federal AGI | Per child, 2025 |
|---|---|
| $0 to $25,000 | $637 |
| Over $25,000 to $50,000 | $424 |
| Over $50,000 to $75,000 | $212 |
| Over $75,000 to $100,000 | $106 |
| Over $100,000 to $200,000 | $79 |
| Over $200,000 to $350,000 | $53 |
| Over $350,000 | $26 |
The Department publishes the indexed amounts each January in FYI-109; the 2026 figures will be a little higher than these. The 2022 base amounts were $600, $400, $200, $100, $75, $50 and $25.
The AGI steps are cliffs. A family at $50,000 of AGI with three children gets $1,272; at $50,001 it gets $636. A year-end 401(k) contribution or an IRA deposit that pulls AGI back under a step line is worth the difference, on top of the federal saving.
The dependent deduction and the low-income exemption
These two lines on PIT-1 cut taxable income rather than paying out, and together they stand in for the personal exemption New Mexico does not have.
Line 13, the dependent deduction. $4,000 for each dependent except one, for taxpayers filing jointly or as head of household who are not themselves claimed as someone else’s dependent. The first dependent earns nothing; each one after that earns $4,000. A head of household with one child gets no deduction; with two, $4,000; with three, $8,000. Single filers cannot claim it, and the figure is not indexed. At the 3.2% rate the $4,000 is worth $128 of tax; at 4.7%, $188.
Line 14, the low- and middle-income exemption. Up to $2,500 for each person who would have been a federal exemption, the taxpayer, spouse and each dependent, phased out as AGI rises. A joint, head-of-household or surviving-spouse filer gets the full $2,500 a person at AGI of $30,000 or less and nothing at $55,000; single, the full amount at $20,000 and nothing at $36,667; married filing separately, $15,000 and $27,500. For a family of five under $30,000 that is $12,500 off taxable income, which with the federal standard deduction usually brings New Mexico tax to zero. The phase-out runs in steps set out in a table in the instructions (verify the step amounts).
Child care
The Child Day Care Credit on Schedule PIT-RC is 40% of what a working parent paid for day care of a child under 15, up to $8 a day per child, $480 per child and $1,200 per return ($600 married filing separately). It is reduced by any federal child and dependent care credit claimed, and it is limited to households with modified gross income under $30,160 (the 2024 figure; the 2025 and 2026 limits are to come) (verify). Modified gross income is a New Mexico measure that counts nearly all income, including Social Security and other income the income tax exempts. The credit is for a parent who paid for care in order to work, and the provider’s name and the days of care go on the schedule.
Above the income limit there is no New Mexico child-care break at all. The federal dependent care credit and a dependent care FSA at work are the tools; the FSA reduces wages on the W-2 and therefore reduces New Mexico income as well.
The Low Income Comprehensive Tax Rebate
The Low Income Comprehensive Tax Rebate, LICTR, is a refundable rebate on Schedule PIT-RC for residents with modified gross income of $36,000 or less, figured from a table by income and the number of exemptions in the household. It has been indexed since tax year 2022. For 2024 the largest amount was $819, for a household of six or more exemptions with income between $2,501 and $8,000, and a single person’s rebate ran from $218 down to $16; the 2025 and 2026 tables are to come. The claimant must meet residency and presence tests, a full year of residence and at least six months physically in the state (verify), and cannot have been claimed as someone else’s dependent. The rebate is paid on top of the Working Families and Child Income Tax Credits, so a low-income family of four can collect from all three.
529 plans: the no-cap deduction
Contributions to New Mexico’s own 529 plans, The Education Plan and Scholar’s Edge, are deducted in full from New Mexico income on Schedule PIT-ADJ. There is no dollar limit. A parent who puts $10,000 into The Education Plan cuts New Mexico taxable income by $10,000, which at the 4.7% rate is $470 of tax; at 4.9%, $490. The deduction belongs to whoever makes the contribution, so grandparents who are New Mexico residents deduct their own gifts to a grandchild’s account on their own return. Contributions to another state’s plan earn nothing.
The deduction comes with a recapture. A withdrawal that is not for qualified education costs, and any amount that was deducted and later taken out for something else, is added back to New Mexico income in the year of the withdrawal. Federal law lets 529 money pay for K-12 tuition and some other costs; New Mexico follows the federal definition of a qualified withdrawal. Because the federal return never asks about 529 deposits, this is the New Mexico deduction most often missed.
Head of household: the quiet advantage
A single parent filing as head of household gets three things in New Mexico that single filers do not. The brackets: head-of-household filers use the same bracket schedule as married couples filing jointly, so the 1.5% rate runs to $8,000 of taxable income instead of $5,500, the 3.2% rate to $25,000 instead of $16,500, and the 4.9% rate does not begin until $100,000 instead of $66,500. The dependent deduction on line 13, which single filers cannot claim. And the higher low-income exemption ceilings, $30,000 and $55,000 rather than $20,000 and $36,667. The federal head-of-household standard deduction, $24,150 for 2026, flows through as well. The federal rules for who counts as head of household and which parent claims the child apply, since the New Mexico return copies the federal filing status.
Worked example: a single mother of two
Head of household, Las Cruces, children ages 4 and 9. Wages of $38,000, no other income, federal standard deduction. She paid $6,000 of day care for the younger child. New Mexico withholding of $400.
| Federal AGI | $38,000 |
| Federal standard deduction, head of household, line 12 | −$24,150 |
| Dependent deduction, line 13: one dependent after the first | −$4,000 |
| Low- and middle-income exemption, line 14: 3 × $1,500 at AGI $37,500–$40,000 | −$4,500 |
| New Mexico taxable income | $5,350 |
| Tax: 1.5% of $5,350 | $80 |
| Working Families Tax Credit: 25% of a federal EITC of about $4,350 | −$1,088 |
| Child Income Tax Credit: 2 × $424 (2025 figure for AGI $25,000–$50,000) | −$848 |
| Child Day Care Credit: income over the $30,160 limit | $0 |
| Low Income Comprehensive Tax Rebate: income over $36,000 | $0 |
| Refundable credits in excess of tax | $1,856 |
| Withholding | −$400 |
| Refund | $2,256 |
Her New Mexico tax is $80 and her New Mexico refund is $2,256. Nearly all of it is the two refundable credits, which she gets only by filing. Had her wages been $29,000 instead, the exemption would have been the full $7,500, the tax zero, the day-care credit $480 less any federal dependent care credit she used, and LICTR would have paid as well.
Behind the scenes: why New Mexico pays instead of deducting
A deduction is worth most to the family with the highest rate and nothing to the family with no tax. New Mexico’s brackets start at 1.5%, and once the federal standard deduction and the state exemptions come off, a family of four under about $40,000 owes nothing, so a deduction could not reach them. The Legislature chose refundable credits instead. A 2021 law raised the Working Families Tax Credit to 20% for 2022 and 25% from 2023 and opened it to ITIN filers and young workers; the Child Income Tax Credit was created in 2022 and enlarged in 2023, with indexing written in so the amounts rise each year without a vote. Both are paid through the return, which is why the Department wants a PIT-1 from every family that qualifies, including the ones who owe nothing.
What to bring
- Every W-2 and 1099 for both parents, and the federal return or the figures to compute the federal earned income credit
- Each child’s date of birth and Social Security number or ITIN, and how many months the child lived with you
- Day-care receipts with the provider’s name, address and tax number, and the number of days of care per child, if household income is under the limit
- Contributions to The Education Plan or Scholar’s Edge by anyone in the household, and any 529 withdrawals
- If a child was adopted with special needs, the adoption decree and the state’s certification
- If you are divorced or separated: the custody arrangement and any Form 8332, since the New Mexico credits follow the federal claim
- If you file with an ITIN: the ITIN letters for everyone on the return
- Any letter from the Taxation and Revenue Department about a prior credit
Questions people ask
Does New Mexico have a child tax credit?
Yes. The Child Income Tax Credit pays a fixed amount per qualifying child set by federal AGI, $637 per child under $25,000 of AGI down to $26 above $350,000 for 2025, with 2026 amounts to come. It is refundable and claimed on Schedule PIT-RC.
I owe no New Mexico tax. Is there any reason to file?
Yes, if you have children or low income. The Working Families Tax Credit, the Child Income Tax Credit and the Low Income Comprehensive Tax Rebate are all paid in cash through the return, and none of them is paid without one.
I file with an ITIN. Can I get the Working Families Tax Credit?
Yes. New Mexico allows the credit to residents who would qualify for the federal earned income credit except for the ITIN. You compute the federal credit as if you were eligible and claim 25% of it on PIT-1.
Can I deduct my child’s school tuition or supplies?
No. New Mexico has no K-12 credit or deduction and no college tuition credit. A 529 account at The Education Plan or Scholar’s Edge is the state tax break for education: contributions are deducted in full, and qualified withdrawals, including for tuition, are not taxed.
We put $15,000 into a 529 last year. Is the whole amount deductible?
If the plan is The Education Plan or Scholar’s Edge, yes, with no cap, on Schedule PIT-ADJ. If it is another state’s plan, none of it.
Does the federal child tax credit reduce my New Mexico tax?
No. New Mexico starts from federal AGI, which is figured before any federal credit. The New Mexico credits are separate and are claimed on the state return.
File, even at zero
New Mexico’s help for families is paid through the return, not taken off the bill; the family that does not file leaves the Working Families credit, the child credit and the rebate on the table.
Written by Charles Trautman, EA, editor · Need to Know Tax, Lone Tree, Colorado
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Forms and official pages named in this article
Sources and where to check
- New Mexico Taxation and Revenue Department: New Mexico Child Tax Credit (2025 amounts by income)
- New Mexico Taxation and Revenue Department: Personal Income Tax Information Overview (Working Families Tax Credit, low- and middle-income exemption, LICTR)
- New Mexico Taxation and Revenue Department: Personal Income Tax