Live in New Mexico, Work in Montana: Which State Taxes Your Paycheck?
Answer
Montana withholds and New Mexico credits. Without an agreement between them, both states are entitled to tax income earned in Montana by a New Mexico resident. The mechanism that stops you paying twice is the credit on the New Mexico resident return, which is why the Montana return has to be completed first.
Last verified
Without an agreement between New Mexico and Montana, the overlap is handled after the fact rather than prevented. That is why the filing order matters: the Montana figure is an input to the New Mexico return, so completing New Mexico first means doing it twice.
A New Mexico resident taxed by another state on the same income claims the credit for taxes paid to other states on Form PIT-1 (credit for taxes paid to another state). The credit is capped at the New Mexico 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 · MontanaForm 2 with the nonresident/part-year schedule
File the Montana nonresident return FIRST — you need the Montana tax figure before you can complete New Mexico.
- 2Resident return · New MexicoForm PIT-1 (credit for taxes paid to another state)
File a New Mexico resident return reporting all income, then claim the credit for tax paid to Montana. The credit is capped at what New Mexico would have charged on that same income, so if Montana taxes it at a higher rate the difference is not refunded.
The two states, side by side
| New Mexico | Montana | |
|---|---|---|
| Taxes wages | Yes — graduated | Yes — graduated |
| Reciprocity partners | None | 1 (Form MW-4) |
| Convenience rule | No | No |
| Nonresident return | Form PIT-1 with Schedule PIT-B | Form 2 with the nonresident/part-year schedule |
| Credit for other-state tax | Form PIT-1 (credit for taxes paid to another state) | Form 2 (credit for income tax paid to another state) |
| Nonresident safe harbour | None published | None published |
| Local income tax | No | No |
| Revenue department | New Mexico Taxation and Revenue Department | Montana Department of Revenue |
| Last verified |
The other direction
Reversing the commute does not always reverse the answer. Living in Montana and working in New Mexico 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: New Mexico → MontanaHome state only
- 1099 contractor: New Mexico → MontanaHome state, plus the client state if you work there
- Moved mid-year: New Mexico → MontanaTwo part-year returns
Other New Mexico pairs
Questions people actually ask
I live in New Mexico and work in Montana. Which state takes the tax out of my paycheck?
Montana withholds and New Mexico credits. Without an agreement between them, both states are entitled to tax income earned in Montana by a New Mexico resident. The mechanism that stops you paying twice is the credit on the New Mexico resident return, which is why the Montana return has to be completed first.
Which state should my employer be withholding for?
Montana. The wages are sourced to Montana, so Montana withholding is correct and there is no New Mexico 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. New Mexico gives residents a credit for tax paid to Montana on the same income, claimed on Form PIT-1 (credit for taxes paid to another state). The credit is capped at the New Mexico tax on that income, so if Montana taxes it more heavily the excess is not refunded by either state.
How current is this?
The New Mexico and Montana rules on this page were last checked against New Mexico Taxation and Revenue Department and Montana 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
- Montana Department of Revenue — individual income taxaccessed 2026-08-07