New Mexico Payroll Tax Guide (2026)

New Mexico is the rare state where the unusual item is measured in dollars rather than percent: every covered worker costs the employer $2.55 and the employee $2.25 in workers compensation assessment fee each quarter, on top of unemployment tax on the first $34,800 of wages.^[7]

10 min read • Reviewed by Rajanikant Patel CPA • Verified Oct 1, 2026 • Sources: NM TRD, NMDWS, IRS

Quick Facts

New Mexico payroll at a glance

New Mexico has two state payroll taxes plus a small quarterly fee: graduated income tax withheld from employees, unemployment insurance paid only by employers, and a workers compensation assessment fee split between the two.^[7]

State income tax withholding

1.50%–5.90% ^[1]

UI taxable wage base

$34,800 per employee ^[7]

New employer UI rate

1.00% to 5.40% ^[7]

Experienced UI rate range

0.33%–5.40% ^[7]

Workers Compensation Assessment Fee, employee share, withheld from employee

$2.25 per covered employee per quarter, no cap ^[3]

Workers Compensation Assessment Fee, employer share

$2.55 per covered employee per quarter ^[3]

Social Security wage base

$184,500 ^[2]

FUTA net rate

0.6% = $42 per employee ^[13]

State minimum wage

$12.00 per hour ^[9]

UI registration trigger

An employer must register the business online when it hires its first… ^[7]

Exempt salary threshold

$35,568 per year ^[12]

Additional Medicare threshold

Over $200,000, employee only ^[3]

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What changed for New Mexico payroll in 2026

Six items moved for New Mexico employers this year. Anything below is what have changed since the 2025 tables, so a rate card carried over from last year will be wrong in at least one place.

Workers comp fee 2.55 and 2.25 UI wage base rises to 34,800 HB 252 brackets, 1.5% to 5.9% Minimum wage holds at 12.00 New employer rate is NAICS average No FUTA credit reduction

Dropping the workers compensation fee because it is not a percentage: The New Mexico workers compensation assessment fee is a flat dollar amount per covered employee per quarter rather than a rate applied to wages, so percentage driven payroll setups quietly leave it out. For 2026 the employer owes $2.55 and the employee owes $2.25 for every covered worker each quarter, reported together on Form TRD-41431. It is small money per head, but it compounds across headcount and across four quarters and it is the item New Mexico auditors look for first.^[3]

Estimate

2026 New Mexico payroll tax calculator

Enter one employee’s annual gross wages to see what the employer owes, what comes out of the paycheque, and the true cost of employment.

New Mexico · 2026 rates · per employee, per calendar year

Annual gross wages ($)

Cash wages subject to payroll tax, before any withholding.

Your UI contribution rate

Your exact rate comes from New Mexico Department of Workforce Solutions each year.

Custom UI rate (%)

FUTA basis

FUTA is 6.0% less a 5.4% credit where the state has no outstanding federal loan.

Employer pays

UI, on first $34,800–

Workers Compensation Assessment Fee, employer share, on all wages–

FUTA, on first $7,000–

Social Security, 6.2%–

Medicare, 1.45%–

Employer payroll tax–

Withheld from the employee

Workers Compensation Assessment Fee, employee share, 2.25%, no cap–

Social Security, 6.2%–

Medicare, 1.45%–

Additional Medicare, 0.9% over $200,000–

Withheld from employee–

True cost of employment–

Employer tax as % of wages–

Total payroll tax, both sides–

State income tax withholding is not included above: it depends on the employee’s Federal Form W-4. New Mexico does not issue its own state withholding certificate and the Taxation and Revenue Department tells employers that the amount withheld varies with the allowances claimed on the federal W-4 and the pay frequency. and filing status, so it cannot be estimated from gross pay alone.

Rates & Nexus

Payroll tax rates & the nexus question

New Mexico runs four state payroll taxes. The table below is the whole state layer for 2026.^[7]

The state payroll taxes

Tax	Paid by	2026 rate	Wage base
UI	Employer	0.33%–5.40%; 1.00% to 5.40% new	$34,800
Workers Compensation Assessment Fee, employer share	Employer	$2.55 per covered employee per quarter	All wages
Workers Compensation Assessment Fee, employee share	Employee	$2.25 per covered employee per quarter	No limit
Income tax withholding	Employee	1.50%–5.90%	No limit

New Mexico does not give every new employer the same number. Under 11.3.400 NMAC a new employer is assigned the average of the contribution rates for all contributing employers in its North American Industry Classification System sector, and that assigned rate cannot be less than 1% or more than 5.4%. Once an employer has 24 months of experience its rate is its benefit ratio multiplied by the reserve factor and then by its experience history factor, still bounded by 0.33 and 5.4%.^[7]

Who has to register

An employer must register the business online when it hires its first employee and meets the wage test, which 11.3.400 NMAC states as paying an individual wages of $450 or more in any calendar quarter.^[7] Income tax withholding is administered separately by New Mexico Taxation and Revenue Department, so most employers end up with two state account numbers, not one.

Multistate and remote employees

When an employee works in more than one state, the four-part test below decides which state the wages are reported to. The tests run in order: you stop at the first one that gives an answer.

1. Localisation of service→
2. Base of operations→
3. Place of direction & control→
4. Employee’s residence

One remote employee is usually enough. A single person working from home in New Mexico generally creates an obligation to register and report wages here, even if the business has no office, property or customers in the state.

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Compliance

Registration & return filing

Registration is online and free. The unemployment account and, where one exists, the withholding account are opened separately and carry different numbers.^[7]

How to register

Cross the wage threshold→
the state online filing system→
Receive account number→
File & deposit online

Deposit schedule

Wage withholding is reported on Form TRD-41414 through the Taxpayer Access Point. New Mexico assigns a filing cycle based on the size of the taxpayer’s liability, but the department pages reached for this entry do not publish the dollar thresholds that separate the monthly, quarterly and semiannual cycles.^[1]

Returns, reports & due dates

Form	What it is	Due
Form TRD-41414 Wage Withholding Tax Return, Form TRD-41409 for non wage withholding…	Income tax withholding returns	Wage withholding is reported on Form TRD-41414 through the Taxpayer Ac
Annual reconciliation	Year-end withholding reconciliation	Last day of February
Form 941	Federal quarterly return	Last day of the month after quarter end
Form 940	Federal unemployment, annual	January 31
New hire report	Report of newly hired employees	Within 20 days of start date

Quarterly unemployment returns are due April 30, July 31, October 31, January 31. A return filed one day late is delinquent, and in most states the penalty attaches to the return, not the payment.^[7]

Pricing

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Line items the big providers quietly bill for

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Setup fee

one-time onboarding

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Every payroll run

each pay cycle

billed
extra

Off-cycle payroll

corrections & bonuses

billed
extra

Year-end filings

W-2s, 1099s & more

billed
extra

All you actually pay

Per employee, per pay run

$6 /emp

Plus a flat $40 minimum per pay run. That’s the whole bill.

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Wage Base

Subject wages vs. exempt payments

Not every dollar an employee receives is a taxable wage. The split below governs what goes into the unemployment wage base and what is reported at year end.^[7]

Subject wages

Salaries, hourly pay, overtime and piece rates
Commissions, bonuses and incentive pay
Most cash tips reported by the employee
Vacation, holiday and paid sick leave when taken as wages
Severance and payments in lieu of notice
The cash value of meals and lodging provided as compensation
Employer contributions to a non-qualified deferred compensation plan
Wages subject to the employee-paid contributions listed above

Not subject

Reimbursements of genuine business expenses under an accountable plan
Employer contributions to a qualified retirement plan
Employer-paid premiums for accident and health insurance
Most third-party sick pay after the sixth calendar month
Payments to a genuine independent contractor
Workers compensation benefits

The wage base is per employer, per year, not per job. If you hire someone in August who already earned $34,800 elsewhere, your unemployment clock still starts at zero. The one exception is a successor employer taking over an existing payroll, who inherits the wages already paid.

Reference

Glossary of key terms

Taxable wage base: The slice of each employee’s annual pay that unemployment tax is calculated on. In New Mexico that is $34,800 for 2026. Earnings above it are still wages, they are simply no longer taxed for unemployment.
Workers Compensation Assessment Fee, employee share: An employee-funded contribution withheld from pay at $2.25 per covered employee per quarter. It is the employee’s money, so it is withheld rather than paid by the employer, but the employer is responsible for remitting it.
Experience rating: The method New Mexico Department of Workforce Solutions uses to set each employer’s own unemployment rate from its history of claims. Employers with fewer charged claims move down the schedule; those with more move up.
New employer rate: The rate assigned before an employer has enough history to be experience rated. It normally applies for two to three years, then the account moves onto the experience schedule.
Federal Form W-4. New Mexico does not issue its own state withholding certificate and the Taxation and Revenue Department tells employers that the amount withheld varies with the allowances claimed on the federal W-4 and the pay frequency.: The state withholding certificate. It sets how much income tax comes out of each cheque and is filed with the employer, not with New Mexico Taxation and Revenue Department.
Reserve account: The running balance of contributions an employer has paid in, less the benefits charged against it. The ratio of that balance to taxable payroll is what drives the assigned rate.
Successor employer: A business that acquires another’s payroll may inherit both its experience rate and the wages already paid toward the wage base for the year. Getting this wrong is a common acquisition error.
Localisation of service: The first of four tests deciding which state a multistate employee’s wages are reported to. If substantially all the work is in one state, that state wins and the remaining tests are never reached.
FUTA credit reduction: A reduction in the 5.4% federal unemployment credit applied to states that have carried an outstanding federal loan for two or more consecutive Januaries. It raises the effective FUTA rate and is settled each November.
Supplemental wages: Bonuses, commissions, awards and similar payments made outside the regular payroll cycle. Many states set a separate flat withholding rate for them.

Federal, State & Local

New Mexico payroll tax, layer by layer

Federal tax applies everywhere and is the larger number. The state layer is what changes when you cross a border.

Layer 1: Federal

Tax	Rate	2026 base
Social Security	6.2% each side	$184,500
Medicare	1.45% each side	No limit
Additional Medicare	0.9% employee only	Over $200,000
FUTA, standard	0.6% net	$7,000
Federal income tax	Per Form W-4	No limit

New Mexico has no FUTA credit reduction for 2026, so the standard 0.6% net rate applies, $42 per employee. The final list is not published until 10 November 2026.^[13]

Layer 2: State

Tax	Rate	2026 base
UI, new employer	1.00% to 5.40%	$34,800
UI, experienced	0.33%–5.40%	$34,800
Workers Compensation Assessment Fee, employer share	$2.55 per covered employee per quarter	All wages
Workers Compensation Assessment Fee, employee share, employee	$2.25 per covered employee per quarter	No limit
Income tax, standard	1.50%–5.90%	No limit

Layer 3, county & city: no payroll tax, but a wage floor

No county or city in New Mexico levies its own payroll or income tax withheld by employers. The local layer shows up as minimum wage, not as tax.^[9]

The state minimum wage is $12.00 an hour, effective 2023-01-01. The tipped cash wage is $3.00. The statewide rate has been $12.00 since 2023 and did not change for 2026. Some New Mexico municipalities and counties have adopted their own minimum wage ordinances that run above the state figure and adjust on their own schedules, so employers should check the ordinance for the place where the work is performed. Those local rates could not be confirmed from a city or county source for this entry.^[9]

Overtime exemption is a separate test. A salaried employee is exempt from overtime only above $35,568 a year ($684.00 a week) federal FLSA, and only if the duties test is also met. Paying a salary is not by itself enough.^[12]

FAQ

New Mexico payroll FAQs

It is a flat quarterly fee tied to each employee covered by the Workers Compensation Act, and both sides pay. For 2026 the employer pays $2.55 per covered employee per quarter and withholds $2.25 per covered employee per quarter from the worker. Both halves are reported and remitted on Form TRD-41431, the Workers Compensation Fee Return and Employees Quarterly Wage and Withholding Report.

No. New Mexico does not publish a state equivalent of the W-4. The Taxation and Revenue Department tells employers to withhold state income tax whenever federal income tax is withheld, and to work from the allowances the employee claimed on the federal Form W-4 together with the pay frequency and the state wage withholding tax rate tables.

There is no single new employer rate. Under 11.3.400 NMAC a new employer is assigned the average of the contribution rates for all contributing employers in its North American Industry Classification System sector, and that assigned rate cannot be lower than 1% or higher than 5.4%. After 24 months of experience the rate is recalculated from the employer’s own benefit ratio, the reserve factor and its experience history factor.

New Mexico uses a graduated schedule with six brackets running from 1.5% on the lowest band to 5.9% on income above the top threshold. That structure was enacted by House Bill 252 in the 2024 regular session and applies to taxable years beginning on or after 1 January 2025, so it is the schedule behind the 2026 withholding tables.

The registration duty is triggered on hiring the first employee and meeting the wage test, which the administrative code states as paying an individual $450 or more in wages in any calendar quarter. Registration is done online with the Department of Workforce Solutions, and quarterly reports are filed electronically on or before the last day of the month after each calendar quarter ends.

No. New Mexico has no state paid family leave contribution and no state temporary disability contribution. Apart from state income tax withholding, the only recurring New Mexico deduction from an employee’s pay is the 2.25 dollar quarterly workers compensation assessment fee. Unemployment insurance in New Mexico is funded entirely by employers.

$34,800 per employee per calendar year. Once an employee reaches that in wages from you, no further unemployment tax is due on that employee for the rest of the year. The count restarts on 1 January and does not carry over from a previous employer.

$12.00 an hour. No local ordinance sets a higher rate. The tipped cash wage is $3.00.

April 30, July 31, October 31, January 31. A return is delinquent the day after the deadline even if the tax itself was paid on time, so file the return whether or not you can pay.

Verification

Sources & methodology

Methodology: every rate, threshold and due date on this page was taken from the administering agency’s own published material for the 2026 tax year, checked on Oct 1, 2026. Where a federal figure applies it comes from the IRS, SSA or US Department of Labor. 8 data points on this page could not be confirmed against a primary source and are either omitted or marked as not published, rather than estimated. Rates change, and some change mid-year, so confirm against your own rate notice before running a payroll.

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