1099 Contractor in New Mexico with a Alabama Client: Where Do You File?
Answer
New Mexico taxes all of it; Alabama taxes only what you earn on its soil. Nothing is withheld from a 1099, so you pay New Mexico quarterly. A Alabama client alone creates no Alabama filing obligation — performing services inside Alabama does, and New Mexico then credits that tax.
Last verified
Reciprocity agreements are the first thing contractors ask about and the first thing that does not apply to them. Every agreement in the country is a wage-withholding arrangement, and a 1099 has no withholding to switch off.
Alabama publishes no de minimis day count or dollar floor for nonresidents. Any Alabama-source wage income above the state's general filing threshold requires a nonresident return, and that threshold is reset each year — check the current figure on the Alabama Department of Revenue nonresident instructions before filing.
What you file
- 1Quarterly estimated payments · New Mexico
Make quarterly estimated payments to New Mexico Taxation and Revenue Department on your full self-employment income — nothing is withheld from a 1099.
- 2Nonresident return · AlabamaForm 40NR
File a Alabama nonresident return only if you performed services inside Alabama. Alabama publishes no de minimis day count or dollar floor for nonresidents. Any Alabama-source wage income above the state's general filing threshold requires a nonresident return, and that threshold is reset each year — check the current figure on the Alabama Department of Revenue nonresident instructions before filing.
- 3Resident return · New MexicoForm PIT-1 (credit for taxes paid to another state)
File the New Mexico resident return last and claim the credit for any tax paid to Alabama.
The two states, side by side
| New Mexico | Alabama | |
|---|---|---|
| Taxes wages | Yes — graduated | Yes — graduated |
| Reciprocity partners | None | None |
| Convenience rule | No | No |
| Nonresident return | Form PIT-1 with Schedule PIT-B | Form 40NR |
| Credit for other-state tax | Form PIT-1 (credit for taxes paid to another state) | Schedule CR |
| Nonresident safe harbour | None published | None published |
| Local income tax | No | Yes |
| Revenue department | New Mexico Taxation and Revenue Department | Alabama Department of Revenue |
| Last verified |
The other direction
Reversing the commute does not always reverse the answer. Living in Alabama and working in New Mexico gives:Home state, plus the client state if you work there.
Same two states, different situation
The withholding answer turns on how you are paid and where the work happens, not only on which two states are involved.
- W-2 commuter: New Mexico → AlabamaBoth states — credit offsets the double tax
- Remote worker: New Mexico → AlabamaHome state only
- Moved mid-year: New Mexico → AlabamaTwo part-year returns
Other New Mexico pairs
Questions people actually ask
I live in New Mexico and my client is in Alabama. Do I have to file a Alabama tax return?
New Mexico taxes all of it; Alabama taxes only what you earn on its soil. Nothing is withheld from a 1099, so you pay New Mexico quarterly. A Alabama client alone creates no Alabama filing obligation — performing services inside Alabama does, and New Mexico then credits that tax.
Do reciprocity agreements help a 1099 contractor?
No. Every state reciprocity agreement in the country is an arrangement about wage withholding between two revenue departments, and a 1099 has no withholding to switch off. Whether New Mexico and Alabama hold an agreement makes no difference to a self-employed filer — sourcing rules decide the answer instead.
How current is this?
The New Mexico and Alabama rules on this page were last checked against New Mexico Taxation and Revenue Department and Alabama Department of Revenue on 2026-08-07. We re-check the full grid every December after state legislative sessions close, and re-check the convenience-of-the-employer states quarterly because that is where the rules move fastest.
Sources
Every fact above comes from the revenue department that publishes the rule. We do not cite secondary summaries, and we do not restate a figure we could not find at source.
- New Mexico Taxation and Revenue Department — individual income taxaccessed 2026-08-07
- Alabama Department of Revenue — individual income taxaccessed 2026-08-07