New Mexico taxpayers could claim a home-based child care tax credit

Eligible taxpayers could claim a credit against their New Mexico income tax. The taxpayer must file an individual New Mexico return, not be another person's dependent, and have a dependent child age five or younger. The taxpayer could claim the credit only if the child is not enrolled in a state-funded or private child care facility or pre-kindergarten program. The credit would be $1,000 per month for each month the child is not eligible to enroll in public school. The taxpayer must apply to the Early Childhood Education and Care Department for an eligibility certificate. Any credit above the taxpayer's income tax liability would be refunded. The provision would apply to taxable years beginning on or after January 1, 2026.

The Taxation and Revenue Department would adjust the credit for inflation beginning with the 2027 tax year. The adjustment would apply to the credit amount for each taxable year beginning in 2027 and later. The calculation would compare the consumer price index for the prior taxable year with the index for tax year 2025. The adjusted amount would be rounded down to the nearest dollar. The amount could not decrease from the preceding year's credit. The inflation adjustment would begin with taxable year 2027 and continue in later taxable years.

Married taxpayers filing separate returns would each claim only half of the credit available on a joint return. This limit applies when married individuals file separate returns for a year in which they could have filed jointly. Only one credit would be certified per dependent child who is not enrolled in a state-funded or private pre-kindergarten program each month, subject to the bill's separate-return rule. The Early Childhood Education and Care Department would issue eligibility certificates and could adopt administrative rules. The rules would apply to taxable years beginning on or after January 1, 2026.