Bank Gap by State

The Bank Gap in New Mexico

New Mexico's top income-tax rate of 5.9% applies to savings interest against a cost of living that stays below the national average, keeping the overall stakes of the Bank Gap moderate.

Big-bank average0.38%

Best available4.40%

$1,005/yrlost on a $25k balance · 4.02 pp spread

Last reviewed August 7, 2026 · SwitchWize Research Desk

Best savings APY

4.40%

high-yield

National average

0.38%

big-bank avg

APY gap

4.02 pp

spread

NM tax on interest

5.90%

top marginal rate

Before NM tax

$1,005/yr

on a $25,000 balance

After NM 5.9% tax

$946/yr

recoverable by switching

On a $25,000 balance, the gap is about $1,005 a year before tax. After New Mexico's 5.9% top income-tax rate on the additional interest, you keep about $946. Because Treasury interest is exempt from New Mexico income tax, routing that cash through a state-tax-exempt Treasury vehicle can recover most of the difference.

Estimated Bank Gap by balance

Estimated annual Bank Gap by balance at 0.38% current APY versus 4.40% better-fit APY, before and after NM state income tax
Balance	Current earnings	Better-fit earnings	Estimated Bank Gap	After NM tax
$5,000	$19	$220	$201	$189
$10,000	$38	$440	$402	$378
$25,000	$95	$1,100	$1,005	$946
$50,000	$190	$2,200	$2,010	$1,891
$100,000	$380	$4,400	$4,020	$3,783

Estimates over 12 months at 0.38% current APY and 4.40% better-fit APY. The "After NM tax" column applies NM's 5.9% top income-tax rate to the additional interest; federal tax applies on top and is not shown. Example only — your result depends on your balance, rates, and time horizon.

Why New Mexico changes the math

New Mexico taxes interest income at a top graduated rate of 5.9%. Treasury interest is exempt from that tax, giving higher-income New Mexico savers a real after-tax edge from T-Bills or a government money market fund.

A below-average cost of living keeps typical New Mexico emergency-fund balances modest outside the Santa Fe and Albuquerque metros.

Cost of living in New Mexico is below the national average, which shapes how large an emergency fund needs to be and therefore how many dollars the Bank Gap quietly costs on idle cash.

After-tax tip

Because New Mexico taxes savings interest but not Treasury interest, the highest after-tax yield is not always the highest headline APY. Run your tax profile through the short-term savings tool to see whether a Treasury bill or government money market fund beats a taxable account for you.

Open the short-term savings tool

Frequently asked questions

Does New Mexico tax high-yield savings account interest?

Yes. New Mexico treats savings interest as taxable income, with a top rate of 5.9%. Interest from U.S. Treasury bills and the Treasury portion of a government money market fund is generally exempt from New Mexico income tax, which can change the after-tax winner for higher earners.

Is a high-yield savings account worth it in New Mexico?

Yes. Even after New Mexico state tax, moving cash from a national-average account to a top high-yield savings account still leaves you with substantially more interest. The Bank Gap is far larger than the state-tax drag on the additional interest.

Are T-Bills better than a HYSA for New Mexico savers?

They can be for higher earners. Because Treasury interest is exempt from New Mexico income tax, a T-Bill or government money market fund can deliver a higher after-tax yield than a fully taxable savings account at a similar headline rate. The short-term savings calculator computes the breakeven for your exact tax situation.

Your personal Bank Gap

See exactly what the gap is costing you.

Enter your balance and current rate. The Rate Gap Calculator shows the gap per year and over five years.

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Educational information, not tax or financial advice. State tax rules are summarized at a high level and depend on your full situation. Rates are illustrative of current market conditions and should be confirmed with the provider. Confirm tax treatment with a qualified professional.