New Mexico has enacted a state version of the Earned Income Tax Credit (EITC). Modeled after the federal credit, the state follows the same requirements for eligibility and income. A resident who was eligible to claim the federal credit will also be able to claim the state version, as the rules are similar. The EITC is a substantial credit that seeks to reduce poverty in working families with low income, and can be incredibly beneficial to the taxpayer when they file their return.
In New Mexico, the state EITC is offered at 10% of the federal credit, and is fully refundable. Refundability is the key to the success of the EITC as it returns money to the taxpayer, letting the family keep more of what they earned throughout the year, and therefore reducing poverty.
Any portion of the credit that exceeds the resident's tax liability can be issued as a refund, and a family with zero liability can receive the entire credit as a refund. The EITC can be used to offset the state income tax amount, and then can be used against other state or local taxes that the family may owe. For low income families, this credit can be very beneficial in making ends meet at tax time.