Does New Mexico follow the federal no-tax-on-tips and overtime deductions?
DOES NOT CONFORM (TY2025)
New Mexico does not follow the federal deductions for state income tax. You can still claim the tips and overtime deductions on your federal return (Schedule 1-A) — they simply do not reduce your New Mexico state tax. Do not assume your state return treats this income the way your federal return does.
Verified against the official state source below — last verified October 26, 2026
| Deduction | New Mexico position |
|---|---|
| Federal tips deduction (IRC §224) | Does not conform |
| Federal overtime deduction (IRC §225) | Does not conform |
What the state itself says
- Official source
- New Mexico Taxation and Revenue Department, "Instructions for 2025 PIT-1 — New Mexico Personal Income Tax Return"
- Tax years covered
- 2025.
New Mexico starts from federal AGI and subtracts only the federal standard/itemized amount plus state adjustments on Schedule PIT-ADJ; the 2025 instructions contain no tips/overtime item. HB 264 (2026), which would have created state deductions tied to 26 U.S.C. 224/225, was only introduced — its own Fiscal Impact Report treats them as proposals.
Your federal deduction is separate
Whatever your state does, the federal deductions run on their own rules: check your W-2 codes with the W-2 Code Checker, estimate with the Tips Calculator and Overtime Calculator, and see the glossary for any term. All state positions: the state-by-state index.
State position verified October 26, 2026 from the official source above. State guidance changes; confirm on the source before filing. This page is general information, not tax advice.