Airbnb Host Taxes in New Mexico - 2026 Guide

Updated for 2026 (Filing 2025 Taxes)

Tax Basics for Airbnb Hosts in New Mexico

The Land of Enchantment welcomes visitors from around the globe, and increasingly, New Mexicans are opening their homes to travelers through platforms like Airbnb. While sharing your space can be a rewarding experience, it's crucial to understand the tax implications of rental income, which is subject to both federal and New Mexico state taxes. This guide provides an overview for the 2025 tax year.

New Mexico State Tax Rules for Rental Income

As a resident of New Mexico, you are required to file a state income tax return if your rental income exceeds the filing threshold. New Mexico operates on a graduated income tax system, meaning the tax rate increases as your income rises. For the 2025 tax year, New Mexico utilizes Form NMPR-4, the New Mexico Personal Income Tax Return, for reporting income, including income derived from short-term rentals. Self-employed individuals, including Airbnb hosts reporting on Schedule C (discussed below), will need to calculate and pay estimated taxes quarterly to avoid penalties. New Mexico also has a compensating tax, similar to a sales tax, that applies to gross receipts from rentals. The rate varies depending on the type of rental activity and the gross receipts amount. It's important to note that New Mexico’s Taxation and Revenue Department provides specific guidance on gross receipts tax for lodging businesses, and hosts should familiarize themselves with these regulations. Failure to properly collect and remit compensating tax can result in significant penalties. Additionally, local jurisdictions (cities and counties) may impose their own lodging taxes or fees, requiring hosts to register and collect those as well. Detailed information and resources can be found on the New Mexico Taxation and Revenue Department website: https://www.tax.newmexico.gov/. Keep meticulous records of all rental income and expenses to ensure accurate reporting and maximize potential deductions.

The Critical Tax Question: Are You a Business or a Rental?

This is the most important tax question for an Airbnb host, as it determines whether you owe self-employment tax. The IRS classifies rental activity based on the level of services provided.

• Schedule E (Passive Rental Income): Most casual hosts report on Schedule E (Supplemental Income and Loss). This applies if you primarily provide basic lodging and minimal services, such as cleaning between guests. Reporting on Schedule E generally exempts you from the 15.3% self-employment tax.
• Schedule C (Active Business Income): However, if you provide "substantial services" to guests – such as daily cleaning, providing meals, or offering concierge-style assistance – the IRS may consider your rental activity an active business. In this case, you report on Schedule C (Profit or Loss from Business) and are subject to the 15.3% self-employment tax (Social Security and Medicare).

Top Tax Write-offs for New Mexico Hosts

• Platform Fees: Fees charged by Airbnb, VRBO, and other platforms are fully deductible as business expenses.
• Mortgage Interest & Property Taxes: You can deduct the portion of your mortgage interest and property taxes that corresponds to the rental space and the period it was rented. If the property is used for both personal and rental purposes, you must allocate these expenses accordingly.
• Repairs, Maintenance & Cleaning: Deduct costs associated with fixing items in the rental property, routine maintenance (like landscaping), and professional cleaning services. Supplies used for cleaning are also deductible.
• Depreciation: This is a powerful deduction that allows you to recover the cost of your rental property (or improvements) over its useful life. It's a complex calculation, and consulting a tax professional is often recommended.