Are R&D Tax Credits
Available in New Mexico?
Yes. The state of New Mexico provides Research and Development (R&D) Tax Credits for qualified small business taxpayers conducting research within the state.
Overview of the Credit:
A “basic” technology jobs and R&D credit is available for qualified expenditures made by a taxpayer conducting research at a qualified facility.
An “additional” credit is also available for taxpayers eligible for the basic credit who:
Increase annual payroll expense at a qualified facility by at least $75,000 over the base payroll expense (the increase may not have been used previously to qualify for this credit).
Increase annual payroll expense by at least $75,000 for every $1 million in qualified expenditures claimed in a tax year.
Qualified Research and Development Small Business:
Employs no more than 50 employees
Has total qualified expenditures of no more than $5 million in the tax year for which an additional credit is claimed
Credit Amount:
Both the basic and additional credits equal 5% of qualified expenditures.
For taxpayers conducting research in a rural area, this amount is doubled.
Unused credits can be carried forward for three years (post-2014).
The additional credit is generally non-refundable, but for small businesses:Excess credit < $3 million → 100% refunded$3M ≤ excess < $4M → 2/3 refunded$4M ≤ excess ≤ $5M → 1/3 refunded
Application & Reporting:
Applications for the additional credit must be submitted within one year following the end of the tax year in which expenditures were made.
Taxpayers claiming basic or additional credits must file annual reports with the New Mexico Taxation and Revenue Department (TRD) by June 30 of the year following the claim, and for the two succeeding years. Reports must include details of the taxpayer’s business operations in New Mexico.
New Mexico R&D Tax Credit
Case Study:
The company qualified for federal R&D Tax Credits of $135,333 and an additional $65,000 in New Mexico state R&D Tax Credits
FEDERAL | NEW MEXICO | |||
Year | Total QREs | Credit | Total QREs | Credit |
2024 | $1,300,000 | $135,333 | $1,300,000 | $65,000 |
Federal R&D Tax Credit Summary
Year | Total QREs | Credit |
2024 | $1,300,000 | $135,333 |
New Mexico R&D Tax Credit Summary
Year | New Mexico Total |
2024 | $65,000 |
Qualifying Research Activities
The four-part test that defines what counts as qualified research activities under
the R&D Tax Credit program
Purpose of the Research
The activity should develop or improve a business component, such as a product, process, software, formula, technique, or invention, by enhancing functionality, performance, reliability, or quality.
Resolving Uncertainty
The work must address technical uncertainties, such as determining the optimal design, method, or approach to achieve the desired outcome. The results should not be known in advance.
Systematic Experimentation
Eligible research must follow a structured experimentation process, including trial and error, modeling, simulation, or testing alternatives to reach the intended improvement.
Technological Basis
The activity should develop or improve a business component, such as a product, process, software, formula, technique, or invention, by enhancing functionality, performance, reliability, or quality.
Why the R&D Tax Credit Matters ?
Since 1981, the R&D Tax Credit has helped businesses save billions in federal and state taxes. The credit enables companies to hire more staff, expand R&D, invest in facilities, and drive innovation. Thousands of businesses across multiple industries take advantage of this benefit each year.