This credit is for tax that another state imposes on any portion of income that by law is included in New Mexico net income. Tax withheld is not a factor in calculating the allowable credit. If the specific item of income is not subject to taxation in both states, no credit is available. The credit may not be more than the New Mexico tax liability on line 15 of the Form PIT-1, or more than 5-1/2% of the income taxable in the other state. Attach a copy of the complete income tax return(s) from the other state(s).

Income tax you paid to any municipality, county, or other political subdivision of a state or to any central government of a foreign country does not count toward the credit. State includes the District of Columbia, the Commonwealth of Puerto Rico, any territory or possession of the United States, and states and provinces of foreign countries. State does not include their central governments.

NOTE: Effective for retirement income received after December 31, 1995, federal law prohibits any state from taxing certain retirement income (chiefly pension income) unless you are resident of, or domiciled in, that state. For example, you receive a pension from your former California employer. You now reside in New Mexico. California may not tax your retirement income. The retirement income is taxable in New Mexico because you are a New Mexico resident.

Some taxpayers have permanent homes in other states, but they are physically present in New Mexico for at least 185 days during the tax year. They must file as residents of New Mexico. They allocate their retirement income to New Mexico on the PIT-B allocation and apportionment schedule, but they also may take a credit for taxes paid to their home state on line 17, Schedule PIT-ADJ.

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