ARMED FORCES RETIREMENT PAY TAX EXEMPTION

HB 221 removes the $30,000 annual cap on tax exemptions for military retirement pay in New Mexico, making all such income tax-exempt for eligible individuals. It directly affects New Mexico military retirees and their surviving spouses who qualify for lifetime retirement benefits under federal law. The bill amends state tax code to eliminate the previous limitation, meaning retirees no longer face a taxable threshold on their military pay. This change applies to taxable years beginning January 1, 2026, and does not create new benefits but modifies existing tax treatment.