Live in Michigan, Work in New Mexico: Which State Taxes Your Paycheck?
Answer
New Mexico withholds and Michigan credits. Without an agreement between them, both states are entitled to tax income earned in New Mexico by a Michigan resident. The mechanism that stops you paying twice is the credit on the Michigan resident return, which is why the New Mexico return has to be completed first.
Last verified
Without an agreement between Michigan and New Mexico, the overlap is handled after the fact rather than prevented. That is why the filing order matters: the New Mexico figure is an input to the Michigan return, so completing Michigan first means doing it twice.
A Michigan resident taxed by another state on the same income claims the credit for taxes paid to other states on Form MI-1040 (credit for income tax imposed by another state). The credit is capped at the Michigan tax on that income, so it removes the double tax but never refunds the excess when the other state charges more.
What you file
- 1Nonresident return · New MexicoForm PIT-1 with Schedule PIT-B
File the New Mexico nonresident return FIRST — you need the New Mexico tax figure before you can complete Michigan.
- 2Resident return · MichiganForm MI-1040 (credit for income tax imposed by another state)
File a Michigan resident return reporting all income, then claim the credit for tax paid to New Mexico. The credit is capped at what Michigan would have charged on that same income, so if New Mexico taxes it at a higher rate the difference is not refunded.
The two states, side by side
| Michigan | New Mexico | |
|---|---|---|
| Taxes wages | Yes — flat | Yes — graduated |
| Reciprocity partners | 6 (Form MI-W4) | None |
| Convenience rule | No | No |
| Nonresident return | Form MI-1040 with Schedule NR | Form PIT-1 with Schedule PIT-B |
| Credit for other-state tax | Form MI-1040 (credit for income tax imposed by another state) | Form PIT-1 (credit for taxes paid to another state) |
| Nonresident safe harbour | None published | None published |
| Local income tax | Yes | No |
| Revenue department | Michigan Department of Treasury | New Mexico Taxation and Revenue Department |
| Last verified |
The other direction
Reversing the commute does not always reverse the answer. Living in New Mexico and working in Michigan gives:Both states — credit offsets the double tax.
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.
- Remote worker: Michigan → New MexicoHome state only
- 1099 contractor: Michigan → New MexicoHome state, plus the client state if you work there
- Moved mid-year: Michigan → New MexicoTwo part-year returns
Other Michigan pairs
Questions people actually ask
I live in Michigan and work in New Mexico. Which state takes the tax out of my paycheck?
New Mexico withholds and Michigan credits. Without an agreement between them, both states are entitled to tax income earned in New Mexico by a Michigan resident. The mechanism that stops you paying twice is the credit on the Michigan resident return, which is why the New Mexico return has to be completed first.
Which state should my employer be withholding for?
New Mexico. The wages are sourced to New Mexico, so New Mexico withholding is correct and there is no Michigan withholding to set up.
Will I end up paying tax twice on the same income?
Not twice over, but you will pay the higher of the two rates. Michigan gives residents a credit for tax paid to New Mexico on the same income, claimed on Form MI-1040 (credit for income tax imposed by another state). The credit is capped at the Michigan tax on that income, so if New Mexico taxes it more heavily the excess is not refunded by either state.
How current is this?
The Michigan and New Mexico rules on this page were last checked against Michigan Department of Treasury and New Mexico Taxation and Revenue Department 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.
- Michigan Department of Treasury — individual income taxaccessed 2026-08-07
- New Mexico Taxation and Revenue Department — individual income taxaccessed 2026-08-07