Arizona vs New Mexico: Which State Keeps More Money in Your Pocket?
VSDetailed comparison of tax rates, cost of living, and quality of life
📌 With taxes at 2.50% versus 4.90%, $85,000 earners see about $2,040 annual difference. New Mexico compensates via unique culture. Arizona attracts snowbirds seeking tax efficiency; New Mexico pulls retirees prioritizing commute times.
The tax picture between Arizona and New Mexico breaks down like this: 2.50% versus 4.90%. For someone making $85,000, we're talking about $2,040 in annual difference. That's significant, but it's worth looking at what else each state brings to the table.
🔑 Key Differences
- **State income tax**: Arizona at 2.50% vs New Mexico at 4.90%
- **Annual savings** (on $85,000): Arizona saves you ~$2,040
- **Tax system**: Both use progressive brackets
- **Deductions**: Standard federal deductions apply, state variations exist
- **Local taxes**: Check your specific county/city as rates vary within states
Tax Comparison
| Tax Type | Arizona | New Mexico |
|---|---|---|
| State Income Tax | 2.5% | 1.7% - 4.9% |
| 💰 On $40,000 Salary |
State Tax: $1,000
Take Home: $39,000
+$320
|
State Tax: $1,320
Take Home: $38,680
|
| 💰 On $60,000 Salary |
State Tax: $1,500
Take Home: $58,500
+$480
|
State Tax: $1,980
Take Home: $58,020
|
| 💰 On $100,000 Salary |
State Tax: $2,500
Take Home: $97,500
+$800
|
State Tax: $3,300
Take Home: $96,700
|
| Cost of Living | Arizona offers moderate living costs, though Phoenix has experienced significant housing price increases in recent years. Even with this growth, housing remains more affordable than California's major metros. Tucson provides better value while maintaining urban conveniences. Property taxes stay relatively low statewide. However, summer cooling costs can substantially impact your budget - air conditioning runs continuously from May through September in many areas. When comparing job offers, consider both the favorable state tax rates and these variable living expenses. | New Mexico ranks among America's most affordable states. Albuquerque offers genuine metropolitan amenities with housing costs dramatically below national averages - quality homes often sell for $200,000-300,000. Santa Fe commands premium prices but remains more affordable than comparable tourist destinations. Las Cruces, Farmington, and other cities provide exceptional value. Property taxes stay low statewide. General expenses run well below national averages. The extreme affordability means even modest incomes support comfortable lifestyles. |
Pros & Cons
Arizona
✓ Advantages
- Moderate state income tax (max 4.5%)
- No tax on Social Security benefits
- Lower cost of living than California
- Warm climate year-round
- Growing job market especially in Phoenix
⚠ Considerations
- Extremely hot summers with high cooling costs
- Limited public transportation
- Water scarcity concerns
- Sales tax can reach 8-10% in some areas
- Rising housing costs in desirable areas
New Mexico
✓ Advantages
- Low cost of living
- Beautiful landscapes
- Unique culture
- Research institutions
⚠ Considerations
- Lower average salaries
- Limited job market
- High poverty rate in some areas
- Education challenges
Bottom Line
Arizona saves you roughly $2,040 annually at $85,000, which adds up over time. New Mexico keeps drawing people despite the tax premium, largely due to unique culture. You'll find snowbirds gravitating toward Arizona, while retirees often decide New Mexico's advantages justify the cost.📢 Share This Comparison
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