The taxpayers to whom Example 1 would apply would be those whose AGIs are reflected in Table 3, Social Security Income in the 2022 PIT-ADJ Instructions, as you suggest.
This would apparently apply to a taxpayer such as you.
On your federal return, a certain percentage of your Social Security was apparently taxable, and included in your federal AGI. Your federal AGI was then transferred over to Line 9 of your PIT-1 Personal Income Tax Return.
Since you're a taxpayer with an AGI of $100,000 or less, the entire amount of your Social Security benefits that was taxable on your federal return is included as an exemption on Line 24 of the PIT-ADJ Schedule of Additions & Deductions and Exemptions.
In other words, the portion of your Social Security that was taxable on your federal return, and transferred over to your New Mexico return, is now being exempted on Line 24 of PIT-ADJ.
People whose AGI is over that shown in Table 3, however, don't get the exemption on Line 24 of PIT-ADJ of any taxable Social Security carried over from their federal return. Whatever amount was taxable on their federal return remains taxable on their state returns.
