HOUSE BILL 14
57th legislature - STATE OF NEW MEXICO - first session, 2025
INTRODUCED BY
Derrick J. Lente and Javier Martínez
AN ACT
RELATING TO TAXATION; REPEALING THE WORKING FAMILIES TAX CREDIT AND ENACTING THE EARNED INCOME TAX CREDIT.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:
SECTION 1. Section 7-2-18.15 NMSA 1978 (being Laws 2007, Chapter 45, Section 9, as amended) is repealed and a new Section 7-2-18.15 NMSA 1978 is enacted to read:
"7-2-18.15. [NEW MATERIAL] EARNED INCOME TAX CREDIT.--
A. The credit provided by this section may be referred to as the "earned income tax credit". A taxpayer who is an eligible individual may claim the earned income tax credit against the taxpayer's tax liability imposed pursuant to the Income Tax Act in an amount equal to the credit percentage of so much of the taxpayer's earned income for the taxable year as does not exceed the earned income amount; provided that the amount of the credit shall not exceed the excess of:
(1) the credit percentage of the earned income amount; over
(2) the phaseout percentage of so much of the adjusted gross income or, if greater, the earned income, of the taxpayer for the taxable year as exceeds the phaseout amount.
B. The credit percentage and the phaseout percentage shall be determined as follows:
In the case of a taxpayer The credit The phaseout
with: percentage is: percentage is:
1 qualifying child 10.2% 4.8%
2 qualifying children 12% 6.3%
3 or more qualifying children 13.5% 6.3%
No qualifying children 2.3% 1.8%.
C. Except as provided in Subsections E and F of this section, the earned income amount and the phaseout amount shall be determined as follows:
In the case of a taxpayer The earned The phaseout
with: income amount amount is:
is:
1 qualifying child $11,000 $31,000
2 or more qualifying children $15,200 $35,200
No qualifying children $8,000 $25,000.
D. For married individuals filing joint returns, the phaseout amount shall be increased by five thousand dollars ($5,000).
E. Except as provided in Subsection F of this section, if the greater of an eligible individual's earned income or adjusted gross income is less than the earned income amount and the amount of credit is less than one hundred dollars ($100), the amount of the credit shall be one hundred dollars ($100).
F. For the 2026 taxable year and each subsequent taxable year, the earned income amounts and phaseout amounts shown in the table in Subsection C of this section and the amount of credit provided in Subsection E of this section shall be adjusted to account for inflation. The department shall make the adjustment by multiplying each amount of credit by a fraction, the numerator of which is the consumer price index ending during the prior taxable year and the denominator of which is the consumer price index ending in taxable year 2025. The result of the multiplication shall be rounded to the nearest ten dollars ($10.00), except that if the result would be an amount less than the corresponding amount for the preceding taxable year, then no adjustment shall be made.
G. The secretary shall reflect the provisions of Subsections B and C of this section in tables that shall have income brackets of not greater than fifty dollars ($50.00) each for:
(1) earned income between zero and the amount of earned income at which the credit is phased out under Subsection C of this section; and
(2) adjusted gross income between the dollar amount at which the phase out begins under Subsection C of this section and the amount of adjusted gross income at which the credit is phased out under that subsection.
H. That portion of credit that exceeds a taxpayer's tax liability in the taxable year in which the credit is claimed shall be refunded. A refund made to a taxpayer pursuant to this section shall not be treated as income.
I. A taxpayer allowed a tax credit pursuant to this section shall report the amount of the credit to the department in a manner required by the department.
J. The credit provided by this section shall be included in the tax expenditure budget pursuant to Section 7-1-84 NMSA 1978, including the total annual aggregate cost of the credit.
K. As used in this section:
(1) "earned income" means "earned income" as defined in 26 U.S.C. 32(c)(2);
(2) "eligible individual" means a resident who is:
(a) an "eligible individual" pursuant to the federal earned income tax credit who is eligible to claim the federal earned income tax credit in the taxable year; or
(b) an individual who would have been eligible for the federal earned income tax credit but for the: 1) identification number requirement pursuant to 26 U.S.C. 32(m), as that section may be amended or renumbered; or 2) the age requirement pursuant to 26 U.S.C. 32(c)(1)(A)(ii)(II), as that section may be amended or renumbered; provided that the taxpayer is at least eighteen years of age but has not reached the age of twenty-five;
(3) "federal earned income tax credit" means the federal tax credit allowed pursuant to 26 U.S.C. 32, as that section may be amended or renumbered; and
(4) "qualifying child" means "qualifying child" as defined by Section 152(c) of the Internal Revenue Code, as that section may be amended or renumbered, but includes any minor child or stepchild of the taxpayer who would be a qualifying child for federal income tax purposes if the public assistance contributing to the support of the child or stepchild was considered to have been contributed by the taxpayer."
SECTION 2. APPLICABILITY.--The provisions of this act apply to taxable years beginning on or after January 1, 2025.
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