Live in New Mexico, Work Remotely for a South Dakota Employer: Who Taxes You?
Answer
New Mexico taxes the income and South Dakota cannot. Residency, not the location of the job, drives this answer: New Mexico reaches all of a resident's income, and South Dakota has no personal income tax to apply to the part earned inside its borders.
Last verified
Crossing into a state with no income tax does not lower your tax bill, because your home state is not taxing you on where you work — it is taxing you on where you live. New Mexico reaches all of a resident's income, and South Dakota adds nothing on top.
What you file
- 1Resident return · New Mexico
File a New Mexico resident return reporting all of your income.
The two states, side by side
| New Mexico | South Dakota | |
|---|---|---|
| Taxes wages | Yes — graduated | No |
| Reciprocity partners | None | None |
| Convenience rule | No | No |
| Nonresident return | Form PIT-1 with Schedule PIT-B | Not applicable |
| Credit for other-state tax | Form PIT-1 (credit for taxes paid to another state) | No income tax |
| Nonresident safe harbour | None published | Not applicable |
| Local income tax | No | No |
| Revenue department | New Mexico Taxation and Revenue Department | South Dakota Department of Revenue |
| Last verified |
The other direction
Reversing the commute does not always reverse the answer. Living in South Dakota and working in New Mexico gives:No state income tax on your wages.
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 → South DakotaHome state only
- 1099 contractor: New Mexico → South DakotaHome state only — estimated payments
- Moved mid-year: New Mexico → South DakotaOne part-year return — the state you left
Other New Mexico pairs
Questions people actually ask
I live in New Mexico and work remotely for a South Dakota employer. Which state do I pay?
New Mexico taxes the income and South Dakota cannot. Residency, not the location of the job, drives this answer: New Mexico reaches all of a resident's income, and South Dakota has no personal income tax to apply to the part earned inside its borders.
Which state should my employer be withholding for?
New Mexico. Your employer should withhold New Mexico tax rather than South Dakota tax on these wages. If a South Dakota line is showing on your pay stub, raise it with payroll now rather than at filing time.
How current is this?
The New Mexico and South Dakota rules on this page were last checked against New Mexico Taxation and Revenue Department and South Dakota 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
- South Dakota Department of Revenue — individual income taxaccessed 2026-08-07