The Ultimate Guide to New Mexico Real Estate Taxes

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By Jamie Ayers Updated November 11, 2020


There are a wide range of taxes and levies that home buyers and homesellers face in a real estate transaction. Here is our comprehensive guide on New Mexico real estate taxes and how to save thousands of dollars whether you’re buying or selling.

The Ultimate Guide to New Mexico Real Estate Taxes

If you’re thinking of buying a property (or selling one) in New Mexico, an article in Forbes Magazine’s April 2019 edition will be good news. It noted that New Mexico was only one of five states that did not see an increase in property taxes last year.

That’s welcome news for homeowners thinking of selling. After all, people want to move to areas with low tax rates and good services. A steady property tax rate also allows home buyers to assess their finances accurately to ensure they will be able to handle the financial obligation of homeownership.

But property taxes are only one of the taxes that home buyers and sellers face in a real estate transaction. There are also a host of other legal and tax obligations for both buyers and sellers. A trusted real estate professional can go over the wide range of tax credits that are available and he or she can also discuss how to keep transfer taxes, property taxes, and capital gains taxes as low as possible.

Understanding the tax implications of a property sale can save or cost a home buyer and homeseller thousands of dollars. Here’s our comprehensive guide for buyers and sellers when it comes to understanding the ins and outs of New Mexico real estate tax obligations and tax relief.

Will You Have to Pay Taxes When You Sell Your Home in New Mexico?

If you’re selling your home in New Mexico, you likely won’t have to worry about paying a capital gains tax. Like residents in other states, a single person does not have to report a capital gain of up to $250,000. A couple filing a joint return would have a limit of $500,000 before they would have to pay any capital gains taxes.

To determine if you fall under this cap, just take the assessed value of your home (or sale price) and subtract any costs that you incur selling the property and subtract that from your purchase price.

For example, if you purchased your home for $100,000, put $30,000 worth of home improvements into it, and sold it for $200,000, your net capital gain would be $70,000. The capital gain would be even lower if you add mix real estate commissions and other costs into the equation.

There are also residency requirements to take advantage of the above capital gains exemption. It is always best to talk to a professional accountant or tax advisor to understand what your complete tax obligations may be.

How Much Are Real Estate Transfer Taxes in New Mexico (and Who Pays Them)?

A real estate transfer tax is a tax levied on the transfer of title to a property or ownership from one individual or entity to another entity. They are usually charged at the state or local levels. They often tax the transfer of certificates and titles to property and legal deeds from a seller to the buyer.

This can cost thousands of dollars, depending on the value that the property is assessed at. There are only five states in the country that do not have a transfer tax. Lucky for New Mexico home buyers and homesellers, New Mexico is one of them.

But both buyers and sellers in the state should be aware that they may still be subject to local taxes and tariffs. It is also best to discuss real estate tax matters with your realtor or tax advisor.

How to Calculate Property Taxes in New Mexico

Judging by the Forbes Magazine story on property tax hikes across the United States, it’s clear that New Mexico residents like to keep their as low as possible. The state’s median annual property tax that’s paid is about $1,000 less than the national median at $1,232. Its average effective property tax rate is 0.76%. That makes New Mexico the 13th lowest state in terms of property taxes in the country.

Nationally, the average tax rate is assessed at 1.12%. In New Mexico its only 0.72%. Even in Sandoval County, which has property taxes levied at higher rates than the state average at 0.94%, is well below the national average tax rate.

A home assessed at $250,000 in New Mexico in Sandoval would pay $2,350 in property taxes every year. Across the state, the average homeowner with a $250,000 property would pay about $500 less every year.

Tax Breaks for New Mexico Home Buyers & Sellers

New Mexico residents also have a number of tax breaks and credits that they can use when buying or selling a home. If you do your homework or talk a professional real estate agent, you may save yourself thousands of dollars when you sell or buy a home. Here are some deductions and credits for buyers.

The Mortgage Interest Deduction for Buyers

This allows home buyers to deduct interest payments that are made for mortgages. This deduction also applies for interest payments on condos. There are some restrictions however, it is always best to speak to a real estate advisor to find out what counts as mortgage interest.

Property Taxes

As low as property taxes are in New Mexico, you can always save more money through property tax deductions. Homeowners who itemize their tax returns can take off property taxes they pay on their main residence and in some cases other properties that they own.

Tax Breaks and Credits for Sellers

Costs of Home Improvement Repairs and Improvements

Many homeowners in New Mexico like to make home improvements to their property before they sell it. These can be tax deductible. But it’s important to keep all of your receipts. And you must make the repairs and improvements within 90 days of the closing date.

Selling Costs

New Mexico homesellers are also entitled to tax deductions on costs they incur selling their property. These costs can include title insurance fees, broker’s commissions, money for repairs, and inspection fees.

The Next Step

Tax implications and obligation can run buyers and sellers thousands of dollars. If you’re a homeseller, a professional real estate agent can help maximize your profits with advice that keep your tax burden as low as possible. That means more money in your pocket after the sale is complete.

If you’re buying a home, a Clever Partner Agent can walk you through the ins and outs of local property tax laws, assessment procedures and fees that you may have to pay upon purchase. Whether you’re a buyer or seller, having the right knowledge and working with a professional real estate agent could save you thousands of dollars.

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