- New Mexico
What Do Therapists Need to Know About Taxes in New Mexico?
New Mexico may have low filing costs, but its tax system is layered — you’ll need to juggle gross receipts tax, state income tax, and potential entity rules depending on your practice setup. This guide is built for therapists in private practice who want to stay compliant and save money while navigating New Mexico’s tax requirements.
Who this guide is for
This guide is for:
- Licensed New Mexico therapists (LPCCs, LCSWs, LMFTs, psychologists, etc.)
- Private practice owners — solo or group
- Therapists providing in-person or telehealth care
- Clinicians earning 1099/self-employed income
Step 1: Pick the right structure for your practice
Your entity determines liability protection, tax treatment, and compliance tasks.
Sole Proprietorship
- No formal registration unless using a trade name
- Income taxed on your personal return
- No liability protection
- File for a CRS number with the NM Taxation & Revenue Department (for gross receipts tax)
PLLC (Professional LLC)
- New Mexico allows licensed professionals to form PLLCs
- Provides legal liability protection
- Default pass-through taxation unless electing S Corp
- Register with the Secretary of State
S Corporation
- Helps reduce federal self-employment tax
- Must run payroll and file separate tax returns
- Often beneficial at $75K+ net income
- Still subject to New Mexico state income tax and gross receipts tax on services
Professional Corporation (PC)
- Also permitted in NM
- Similar structure and benefits to PLLC
- Can elect S Corp tax treatment
- More commonly used by larger practices or those with multiple owners
Step 2: Know your state tax obligations
State income tax
- New Mexico has progressive income tax brackets, topping out at 5.9% (2025)
- Applies to pass-through income from your practice
- File using Form PIT-1 (Personal Income Tax)
Gross receipts tax (GRT)
- New Mexico charges GRT on services, including therapy
- Rates range from 5%–9%, depending on locality
- You must collect and remit GRT — it's not a sales tax, so it comes out of your fee unless you add it
- Register for a CRS number to report and pay monthly or quarterly
- File using Form CRS-1
Annual reporting
- PLLCs and PCs must file annual reports
- $25 fee, due by the anniversary of formation
- Filed online with the Secretary of State
Step 3: Pay taxes throughout the year — not just in April
Estimated taxes
- Required if you’ll owe $500+ to NM or $1,000+ to the IRS
- Due quarterly: April 15, June 15, Sept 15, Jan 15
- File with Form PIT-ES or pay online through TAP (Taxpayer Access Point)
Self-employment tax
- Applies at 15.3% to net income from sole props or default PLLCs
- S Corps can reduce this by paying a reasonable salary and taking distributions
Filing requirements
- Sole prop: Schedule C + NM PIT-1 + monthly/quarterly CRS-1
- PLLC: Annual report + NM PIT-1 + GRT returns
- S Corp: 1120-S + NM S Corp return (PTE-RC) + payroll + CRS filings + annual report
Step 4: Track and claim your deductions
You’ll owe GRT on gross income — but you can still reduce your federal and state income taxes through deductions.
Deductible expenses for therapists
- EHR software and scheduling tools
- Supervision, CEUs, licensing
- Liability insurance
- Office rent or home office
- Internet, phone, marketing
- Health insurance (if self-employed)
- Retirement plans (Solo 401k, SEP IRA)
- Supplies and subscriptions
Step 5: When it’s time to consider an S Corp
S Corps are worth exploring once you hit about $75K in net income.
- Pay yourself a reasonable salary via payroll
- Take the rest as distributions (not subject to self-employment tax)
- Still responsible for GRT on gross income
- Run the numbers carefully — savings depend on salary vs. distribution split and admin costs
Step 6: Common mistakes therapists make
- Not collecting or reporting gross receipts tax
- Forgetting to register for a CRS number
- Missing quarterly GRT payments
- Waiting too long to consider an S Corp
- Skipping NM annual report filing
- Assuming GRT = sales tax — it doesn’t work the same way
Step 7: Our recommendations by income level
Net Income Range Suggested Action
Under $50K Sole prop or PLLC; stay current on GRT; track expenses tightly
$50K–$100K Consider S Corp; assess payroll needs; monitor GRT closely
Over $100K Full S Corp setup; optimize payroll/distribution balance; tax planning required
Disclaimer: This guide is for informational purposes only and does not constitute legal, tax, or financial advice. While we make every effort to keep the content accurate and up to date, state laws and regulations can change without notice. You should consult a licensed professional in your state before making any decisions based on this information. Leichter Accounting Services is not liable for any errors or omissions, or for any actions taken based on the contents of this guide.
Need help figuring this out?
We help New Mexico therapists stay on top of GRT, state income taxes, and federal tax strategy — so your practice stays compliant and profitable.
Book a consult or email us at david@leichtercpa.com