Two things decide whether a job in New Mexico makes you money: getting the license your work needs, and setting aside the right tax. New Mexico licenses its contractors and taxes their profit, so both are worth getting right before you take work on.
Each section below points to a tool that runs your exact numbers for New Mexico.
Tax in New Mexico
New Mexico has a graduated state income tax that runs up to 5.9% at the top, on top of your federal taxes. Graduated means the rate climbs as your profit does, so a good year costs proportionally more. You owe federal income tax and self-employment tax as well, and you make estimated payments to both New Mexico and the IRS through the year.
On sales tax, New Mexico is one to read carefully. GRT base 4.875% state (up to ~9.06% combined); applies to labor; NTTC prevents pyramiding. Charging tax you should not, or eating tax you should have passed on, comes straight off your margin, so confirm it for your kind of job.
Work out what to hold back on the Tax Set-Aside Calculator, which runs the federal and self-employment numbers for New Mexico.
Getting paid: liens and retainage
A mechanic's lien is the tool that actually gets a New Mexico contractor paid, and in New Mexico you generally have to record it within 90 days of completion of the building or improvement - we count from your last day, which lands earlier and is the safer date. There is usually an earlier notice to send first, so do not wait until the filing deadline to start. Miss it and you lose the lien, so the dates matter.
Enforcing it has its own clock. 2 years from the date you filed the claim of lien (48-2-10). Nobody can force you to sue sooner - New Mexico has no demand-to-commence provision. The owner or original contractor can instead petition the court to post security and cancel the lien, but your claim then attaches to that security rather than lapsing (48-2-9). Work out your dates on the Lien Deadline tool, and if they are close, get an attorney to confirm them against the statute (N.M.S.A. 48-2-2.1, 48-2-6, 48-2-9, 48-2-10).
On money held back as retainage, here is where New Mexico lands:
- Private work: Nothing may be held at all.
- Public work: Nothing may be held at all. 5% of the contract price, cumulatively.
- Release: Private: 10 days (the statute does not say whether these are calendar or business days) from certification of completion, on presentation of an executed release and certified voucher, a lien release if required, and proof of completion. Public: 10 days (the statute does not say whether these are calendar or business days) from certification of completion. Public, transportation: no number of days is set at all. It falls due on full completion of the contract and its acceptance by the state highway engineer.
- Prompt pay: Every construction contract must provide for payment down the chain within 7 days of receipt, at every tier. Late payment carries 1.5% a month: from the 22nd day for an owner, from the 8th day at contractor and subcontractor level.
The threshold is the part most charts leave out. In New Mexico, nothing may be held at all where the Act does not apply to construction contracts for residential property containing four or fewer dwelling units. Prohibited, not capped. §57-28-5(E): when making payments, an owner, contractor or subcontractor shall not retain, withhold, hold back or in any other manner not pay amounts owed for work performed. The 5% cap that used to sit here was deleted by Laws 2007 ch. 213 on 15 June 2007, along with the whole retainage regime. (N.M.S.A. §57-28-5(E))
Whether the rule covers your job at all is a separate question from the percentage. Private: the Act does not apply to construction contracts for residential property containing four or fewer dwelling units.
Check the Retainage Calculator before you sign a contract that holds back more.
Free New Mexico retainage letters
Three letters written for New Mexico's rules, with the state's own release clock and its statutory citation already in them. Fill one in on screen and download it as a PDF or a Word file.
- Retainage Release Request (New Mexico), for when the job is done and the money has not come back
- Retainage Overdue: Demand for Payment (New Mexico), for when the release date has passed and nothing has arrived
- Retainage Held Above the Cap: Challenge Letter (New Mexico), for when more is being held than the state appears to permit
Do you need a license in New Mexico?
New Mexico requires a state contractor license to take building work on. The threshold that triggers it: A license is required with NO dollar floor. The $7,200 is one of eighteen exemptions, and covers work at or under that figure. Working unlicensed when your job needs a license is the expensive mistake here. 60-13-12(A) states plainly that no person shall act as a contractor without a license; the figures live only inside exemptions. Contractor expressly includes subcontractor, specialty contractor and construction manager, and State v. Jenkins holds both contractor and subcontractor must be licensed. ALL THREE DOLLAR EXEMPTIONS RUN THE SAME WAY - 7,200, 5,000 and 2,000 all use does-not-exceed or not-exceeding, so exactly each figure is still EXEMPT and the amount must go ABOVE it before licensure bites. New Mexico is unusually consistent on that. The GB-2 and GB-98 classes turn on BUILDING TYPE AND OCCUPANCY GROUP, not dollar value, confirmed from the Division's own rule at 14.6.6 NMAC: GB-2 covers Groups R-1, R-2 and R-3 of four family units or fewer, GB-98 covers residential and commercial. The only dollar-based scope rule in the CID rules is 14.6.3.8(B), a major-portion-of-the-work test deciding which licensee may act as PRIME CONTRACTOR on a mixed-scope job - bidding authority, not a licensing threshold. None of the eighteen exclusions at 60-13-3(D) is a public-works or disaster-repair exemption. The license comes from NM Regulation & Licensing, Construction Industries Division. New Mexico accepts the NASCLA commercial exam, useful if you work across state lines.
Trade licenses for electrical, plumbing and HVAC are usually separate and often required even where a GC license is not. See what applies to your trade on the Contractor License Checker.
Building codes and permits
New Mexico adopts its building codes statewide, so the rules travel with you across the state. Editions still move, so confirm yours with the building department before you price a job.
- Homes: 2021 (published as the 2021 New Mexico Residential Building Code, 14.7.3 NMAC, effective 14 July 2023)
- Electrical: 2020 (published as the 2020 New Mexico Electrical Code, 14.10.4 NMAC; the state is NOT on the 2023 edition)
- Energy: 2021, in two separate rules, 14.7.6 NMAC for residential and 14.7.9 NMAC for commercial, both effective 30 January 2024
- Plumbing: 2021 or 2024 UPC, applicant's choice until 1 January 2027, after which the 2024 New Mexico Plumbing Code stands alone
New Mexico does not run one edition across the whole job, and the energy code is where it splits: 2021, in two separate rules, 14.7.6 NMAC for residential and 14.7.9 NMAC for commercial, both effective 30 January 2024. That matters more than the number itself. If you work on houses, the residential edition is your book, and the single figure quoted in most adoption charts is the commercial one.
New Mexico sets a mandatory statewide minimum through the Construction Industries Division, and a county or municipality may run its own building department and even write local amendments, but only if the result is at least equal to the state requirement, never weaker. Where a jurisdiction has no certified department, the division permits and inspects directly, so there is nowhere with no code at all. The residential and commercial codes are separate rules on the same 2021 vintage, and the energy code likewise splits into two rules on the same edition and date. Plumbing is mid-transition: the 2024 edition took effect on 1 August 2026 and either edition may be used until 1 January 2027.
Source: 14.7.3, 14.7.2, 14.7.6, 14.7.9, 14.8.2 and 14.10.4 NMAC, Construction Industries Division, under the Construction Industries Licensing Act, NMSA 1978 §60-13-1 et seq.; NMSA 1978 §3-17-6 (local codes must be at least equal). Read against that source on 2026-08-25.
Check a specific job on the permit tool.
Pay and workers' comp
The minimum wage in New Mexico is $12.00 an hour. That is the floor for anyone you put on the books, and it is worth confirming against the state labor department each year because several states step their rate mid-year. Check a rate on the minimum-wage tool.
Workers' comp rates in New Mexico are not published as a single figure; they turn on your trade's class code and your payroll. Get a realistic range on the Workers' Comp Estimator, then get a real quote.
If a client will not pay
If a client will not pay, you can sue for up to $10,000 in New Mexico's Magistrate / Metropolitan Court. That covers most unpaid-invoice disputes for a small outfit; a bigger claim goes to regular civil court where you will probably want an attorney. Walk through whether filing is worth it on the Small Claims checker.
The clock runs the other way too: a client generally has 6 years to sue you over the work under a written contract in New Mexico, with an absolute cutoff 10 years after the job is substantially complete. Work out your exposure on the Warranty & Claim Deadline tool.
Common questions
How much state income tax will I pay in New Mexico?
New Mexico has a graduated rate up to 5.9% state income tax on your profit, on top of federal income tax and self-employment tax. Use the Tax Set-Aside Calculator to see what to hold back.
Do I need a contractor's license in New Mexico?
Yes. New Mexico requires a state contractor license. The threshold: A license is required with NO dollar floor. The $7,200 is one of eighteen exemptions, and covers work at or under that figure. It is issued by NM Regulation & Licensing, Construction Industries Division.
What is the small claims limit in New Mexico?
You can sue for up to $10,000 in New Mexico's Magistrate / Metropolitan Court. The filing fee is typically $77 to $87. Larger claims go to regular civil court.
How long do I have to file a mechanic's lien in New Mexico?
Generally 90 days from completion of the building or improvement - we count from your last day, which lands earlier and is the safer date, and there is usually an earlier notice to send first. Miss it and you lose the lien. Work your own dates out on the Lien Deadline tool.
How much retainage can be held back in New Mexico?
Private: nothing may be held at all. Public: nothing may be held at all. Public, transportation: 5% of the contract price, cumulatively. The condition on it, in the statute's own terms: Private: the Act does not apply to construction contracts for residential property containing four or fewer dwelling units. Run your own figure on the Retainage Calculator.
Are there free New Mexico contract and payment forms?
Yes. This page links 3 retainage letters written to New Mexico's own release clock and carrying its statutory citation. They are free, there is no sign-up, and you fill one in on screen and download it as a PDF or a Word file.
What is the minimum wage in New Mexico?
$12.00 an hour in New Mexico, above the federal $7.25. Several states step their rate mid-year, so confirm it before you set a payroll.
The honest bit
These are the 2026 rules for New Mexico as they stood when this guide was written, and they change: legislatures move thresholds, deadlines and rates every year. Treat this as general guidance to point you in the right direction, not legal, tax or financial advice. Verify anything you rely on at the source (the IRS, the New Mexico tax and licensing agencies, and your local building department) or with a professional. Where New Mexico does something unusual, the detail is called out above rather than glossed over.
Related: Tax Set-Aside Calculator · Mechanic's Lien Deadline · Contractor License Checker · Small Claims checker · Working in Your State
Know someone who needs this?
Keep reading
Templates you might need
Sources
- New Mexico contractor licensing authority · New Mexico contractor licensing authority. Who must hold a contractor or trade license in New Mexico, and the licensing instrument (https://www.nascla.org/commercial-exam-participating-state-agencies/new-mexico-construction-industries-division)
Was this guide useful?
Didn't find what you were looking for?
Spotted something wrong or out of date? Email us at hello@kilnguides.co.uk.
In crisis? 988 Suicide & Crisis Lifeline 988 ·