Live in New Mexico, Work in Nebraska: Which State Taxes Your Paycheck?
Answer
Two returns, one credit. Nebraska has the first claim on wages earned inside the state and withholds accordingly. New Mexico then taxes you as a resident on everything and gives credit for what Nebraska already took, capped at what New Mexico would have charged on that same income.
Last verified
Two states can lawfully tax the same wages: Nebraska because the work happened there, New Mexico because you live there. Nothing prevents the overlap in advance — it is unwound afterwards, on the New Mexico return, through the credit for taxes paid to another state.
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 · NebraskaForm 1040N with Schedule III
File the Nebraska nonresident return FIRST — you need the Nebraska 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 Nebraska. The credit is capped at what New Mexico would have charged on that same income, so if Nebraska taxes it at a higher rate the difference is not refunded.
The two states, side by side
| New Mexico | Nebraska | |
|---|---|---|
| Taxes wages | Yes — graduated | Yes — graduated |
| Reciprocity partners | None | None |
| Convenience rule | No | Yes — general rule |
| Nonresident return | Form PIT-1 with Schedule PIT-B | Form 1040N with Schedule III |
| Credit for other-state tax | Form PIT-1 (credit for taxes paid to another state) | Form 1040N Schedule II |
| Nonresident safe harbour | None published | None published |
| Local income tax | No | No |
| Revenue department | New Mexico Taxation and Revenue Department | Nebraska Department of Revenue |
| Last verified |
The other direction
Reversing the commute does not always reverse the answer. Living in Nebraska 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 → NebraskaConvenience-of-the-employer rule — both states tax you
- 1099 contractor: New Mexico → NebraskaHome state, plus the client state if you work there
- Moved mid-year: New Mexico → NebraskaTwo part-year returns
Other New Mexico pairs
Questions people actually ask
I live in New Mexico and work in Nebraska. Which state takes the tax out of my paycheck?
Two returns, one credit. Nebraska has the first claim on wages earned inside the state and withholds accordingly. New Mexico then taxes you as a resident on everything and gives credit for what Nebraska already took, capped at what New Mexico would have charged on that same income.
Which state should my employer be withholding for?
Nebraska. The wages are sourced to Nebraska, so Nebraska 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 Nebraska 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 Nebraska taxes it more heavily the excess is not refunded by either state.
How current is this?
The New Mexico and Nebraska rules on this page were last checked against New Mexico Taxation and Revenue Department and Nebraska 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
- Nebraska Department of Revenue — individual income taxaccessed 2026-08-07