STANDARD INCOME TAX DEDUCTION INCREASE

HB0093

HOUSE BILL 93

57th legislature - STATE OF NEW MEXICO - second session, 2026

INTRODUCED BY

Elaine Sena Cortez
and
Rebecca Dow

AN ACT

RELATING TO TAXATION; INCREASING THE STANDARD DEDUCTION FOR
INCOME TAX PURPOSES TO TWO HUNDRED FIVE PERCENT OF THE STANDARD
DEDUCTION ALLOWED BY THE FEDERAL GOVERNMENT.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:

SECTION 1.
Section 7-2-2 NMSA 1978 (being Laws 1986,
Chapter 20, Section 26, as amended by Laws 2023, Chapter 17,
Section 1 and by Laws 2023, Chapter 159, Section 1) is amended
to read:

"7-2-2. DEFINITIONS.--For the purpose of the Income Tax
Act and unless the context requires otherwise:

A. "adjusted gross income" means adjusted gross
income as defined in Section 62 of the Internal Revenue Code,
as that section may be amended or renumbered;

B. "base income":

(1) means, for estates and trusts, that part
of the estate's or trust's income defined as taxable income and
upon which the federal income tax is calculated in the Internal
Revenue Code for income tax purposes plus:

(a) for taxable years beginning on or
after January 1, 1991, the amount of the net operating loss
deduction allowed by Section 172(a) of the Internal Revenue
Code, as that section may be amended or renumbered, and taken
by the taxpayer for that year; and

(b) for taxable years beginning on or
after January 1, 2023, an amount equal to the amount of credit
claimed and allowed for that year pursuant to Section 7-3A-10
NMSA 1978 with respect to the distributed net income of a pass-through entity;

(2) means, for taxpayers other than estates or
trusts, that part of the taxpayer's income defined as adjusted
gross income plus:

(a) for taxable years beginning on or
after January 1, 1991, the amount of the net operating loss
deduction allowed by Section 172(a) of the Internal Revenue
Code, as that section may be amended or renumbered, and taken
by the taxpayer for that year; and

(b) for taxable years beginning on or
after January 1, 2023, an amount equal to the amount of credit
claimed and allowed for that year pursuant to Section 7-3A-10
NMSA 1978 with respect to the distributed net income of a pass-through entity;

(3) includes, for all taxpayers, any other
income of the taxpayer not included in adjusted gross income
but upon which a federal tax is calculated pursuant to the
Internal Revenue Code for income tax purposes, except amounts
for which a calculation of tax is made pursuant to Section 55
of the Internal Revenue Code, as that section may be amended or
renumbered; "base income" also includes interest received on a
state or local bond;

(4) includes, for all taxpayers, an amount
deducted pursuant to Section 7-2-32 NMSA 1978 in a prior
taxable year if:

(a) such amount is transferred to
another qualified tuition program, as defined in Section 529 of
the Internal Revenue Code, not authorized in the Education
Trust Act; or

(b) a distribution or refund is made for
any reason other than: 1) to pay for federally allowable
qualified higher education expenses, set out in Section 529 of
the Internal Revenue Code, including other expenses allowed
pursuant to that section as qualified expenses; or 2) upon the
beneficiary's death, disability or receipt of a scholarship;
and

(5) excludes, for a taxpayer who conducts a
lawful business pursuant to the laws of the state, an amount
equal to any expenditure that is eligible to be claimed as a
federal income tax deduction but is disallowed by Section 280E
of the Internal Revenue Code, as that section may be amended or
renumbered;

C. "compensation" means wages, salaries,
commissions and any other form of remuneration paid to
employees for personal services;

D. "department" means the taxation and revenue
department, the secretary or any employee of the department
exercising authority lawfully delegated to that employee by the
secretary;

E. "fiduciary" means a guardian, trustee, executor,
administrator, committee, conservator, receiver, individual or
corporation acting in any fiduciary capacity;

F. "filing status" means "married filing joint
returns", "married filing separate returns", "head of
household", "surviving spouse" and "single", as those terms are
generally defined for federal tax purposes;

G. "fiscal year" means any accounting period of
twelve months ending on the last day of any month other than
December;

H. "head of household" means "head of household" as
generally defined for federal income tax purposes;

I. "individual" means a natural person, an estate,
a trust or a fiduciary acting for a natural person, trust or
estate;

J. "Internal Revenue Code" means the United States
Internal Revenue Code of 1986, as amended;

K. "lump-sum amount" means, for the purpose of
determining liability for federal income tax, an amount that
was not included in adjusted gross income but upon which the
five-year-averaging or the ten-year-averaging method of tax
computation provided in Section 402 of the Internal Revenue
Code, as that section may be amended or renumbered, was
applied;

L. "modified gross income" means all income of the
taxpayer and, if any, the taxpayer's spouse and dependents,
undiminished by losses and from whatever source, including:

(1) compensation;

(2) net profit from business;

(3) gains from dealings in property;

(4) interest;

(5) net rents;

(6) royalties;

(7) dividends;

(8) alimony and separate maintenance payments;

(9) annuities;

(10) income from life insurance and endowment
contracts;

(11) pensions;

(12) discharge of indebtedness;

(13) distributive share of partnership income;

(14) income in respect of a decedent;

(15) income from an interest in an estate or a
trust;

(16) social security benefits;

(17) unemployment compensation benefits;

(18) workers' compensation benefits;

(19) public assistance and welfare benefits;

(20) cost-of-living allowances; and

(21) gifts;

M. "modified gross income" excludes:

(1) payments for hospital, dental, medical or
drug expenses to or on behalf of the taxpayer;

(2) the value of room and board provided by
federal, state or local governments or by private individuals
or agencies based upon financial need and not as a form of
compensation;

(3) payments pursuant to a federal, state or
local government program directly or indirectly to a third
party on behalf of the taxpayer when identified to a particular
use or invoice by the payer; or

(4) payments for credits and rebates pursuant
to the Income Tax Act and made for a credit pursuant to Section
7-3-9 NMSA 1978;

N. "net income" means, for estates and trusts, base
income adjusted to exclude amounts that the state is prohibited
from taxing because of the laws or constitution of this state
or the United States and means, for taxpayers other than
estates or trusts, base income adjusted to exclude:

(1) an amount equal to
two hundred five
percent of
the standard deduction allowed the taxpayer for the
taxpayer's taxable year by Section 63 of the Internal Revenue
Code, as that section may be amended or renumbered;

(2) an amount equal to the itemized deductions
defined in Section 63 of the Internal Revenue Code, as that
section may be amended or renumbered, allowed the taxpayer for
the taxpayer's taxable year less the amount excluded pursuant
to Paragraph (1) of this subsection and less the amount of
state and local income and sales taxes included in the
taxpayer's itemized deductions;

(3) an amount equal to the product of the
exemption amount allowed for the taxpayer's taxable year by
Section 151 of the Internal Revenue Code, as that section may
be amended or renumbered, multiplied by the number of personal
exemptions allowed for federal income tax purposes;

(4) income from obligations of the United
States of America less expenses incurred to earn that income;

(5) other amounts that the state is prohibited
from taxing because of the laws or constitution of this state
or the United States;

(6) for taxable years beginning on or after
January 1, 2013, an amount equal to the sum of any net
operating loss carryover deductions to that year claimed and
allowed; provided that the amount of any net operating loss
carryover may be excluded only as follows:

(a) in the case of a timely filed
return, in the taxable year immediately following the taxable
year for which the return is filed; or

(b) in the case of amended returns or
original returns not timely filed, in the first taxable year
beginning after the date on which the return or amended return
establishing the net operating loss is filed; and

(c) in either case, if the net operating
loss carryover exceeds the amount of net income exclusive of
the net operating loss carryover for the taxable year to which
the exclusion first applies, in the next nineteen succeeding
taxable years in turn until the net operating loss carryover is
exhausted for any net operating loss carryover from a taxable
year beginning on or after January 1, 2013; in no event shall a
net operating loss carryover from a taxable year beginning: 1)
prior to January 1, 2013 be excluded in any taxable year after
the fourth taxable year beginning after the taxable year to
which the exclusion first applies; and 2) on or after January
1, 2013 be excluded in any taxable year after the nineteenth
taxable year beginning after the taxable year to which the
exclusion first applies; and

(7) for taxable years beginning on or after
January 1, 2011, an amount equal to the amount included in
adjusted gross income that represents a refund of state and
local income and sales taxes that were deducted for federal tax
purposes in taxable years beginning on or after January 1,
2010;

O. "net operating loss" means any net operating
loss, as defined by Section 172(c) of the Internal Revenue
Code, as that section may be amended or renumbered, for a
taxable year as further increased by the income, if any, from
obligations of the United States for that year less related
expenses;

P. "net operating loss carryover" means the amount,
or any portion of the amount, of a net operating loss for any
taxable year that, pursuant to Paragraph (6) of Subsection N of
this section, may be excluded from base income;

Q. "nonresident" means every individual not a
resident of this state;

R. "person" means any individual, estate, trust,
receiver, cooperative association, club, corporation, company,
firm, partnership, limited liability company, joint venture,
syndicate or other association; "person" also means, to the
extent permitted by law, any federal, state or other
governmental unit or subdivision or agency, department or
instrumentality thereof;

S. "resident" means an individual who is domiciled
in this state during any part of the taxable year or an
individual who is physically present in this state for one
hundred eighty-five days or more during the taxable year; but
any individual, other than someone who was physically present
in the state for one hundred eighty-five days or more during
the taxable year, who, on or before the last day of the taxable
year, changed the individual's place of abode to a place
without this state with the bona fide intention of continuing
actually to abide permanently without this state is not a
resident for the purposes of the Income Tax Act for periods
after that change of abode;

T. "secretary" means the secretary of taxation and
revenue or the secretary's delegate;

U. "state" means any state of the United States,
the District of Columbia, the commonwealth of Puerto Rico, any
territory or possession of the United States or any political
subdivision of a foreign country;

V. "state or local bond" means a bond issued by a
state other than New Mexico or by a local government other than
one of New Mexico's political subdivisions, the interest from
which is excluded from income for federal income tax purposes
under Section 103 of the Internal Revenue Code, as that section
may be amended or renumbered;

W. "surviving spouse" means "surviving spouse" as
generally defined for federal income tax purposes;

X. "taxable income" means net income less any lump-sum amount;

Y. "taxable year" means the calendar year or fiscal
year upon the basis of which the net income is computed under
the Income Tax Act and includes, in the case of the return made
for a fractional part of a year under the provisions of the
Income Tax Act, the period for which the return is made; and

Z. "taxpayer" means any individual subject to the
tax imposed by the Income Tax Act."

SECTION 2.
APPLICABILITY.--The provisions of this act
apply to taxable years beginning on or after January 1, 2026.

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