Lodging Income versus Farm Income

The article “Ten Legal Issues for Farm Stay Operators” from the National Agricultural Law Center offers the following: “Be aware, though, that lodging income is not the same as farm income so would not be reported on Schedule F. Rather, income reporting will be on Schedule C or Schedule E, depending upon the type of lodging offered. As with other farm business activities, tax deductions may be applicable. Operators should maintain records of all business expenses and discuss tax management strategies with professional tax advisors.” We have a casita on our property that we list on Airbnb and VRBO that we rented for much of last year. Going forward, we have recategorized it as a “farm stay” as part of our effort of promote agri-tourism in our area. However, I’m not sure if that means because we file two different IRS Schedules (F and E), that we need to operate as two separate businesses needing two different business licenses and bank accounts and bookkeeping ledgers. One of the big questions I have been unable to answer is how “farm stays” are defined in New Mexico, and are they considered agricultural, agritourism or simply travel and leisure activities. That said, the Santa Fe Land Sustainability Code designates the following activities can happen in our San Marcos community and Rural Residential district: SMCD Rural Residential (SMCD RUR-R); Purpose. The purpose of this district is to provide for the development of single-family homes on large lots, either individually or as part of rural subdivisions; to preserve the scenic and rural character of the County; to provide consolidated open space and agricultural lands; and to recognize the desirability of carrying on compatible agricultural operations and home developments in areas near the fringes of urban development while avoiding unreasonable restrictions on farming or ranching operations. Uses that support rural character of the broader area shall be allowed including agricultural production, small-scale renewable energy production, home-based businesses, bed and breakfasts, agro-tourism, equestrian and boarding facilities, and farmers’ markets. Although the term and business of “farm stays” was not trending when this legislation was being written and passed in 2019, I think the combination of farming, B&B and agro-tourism, can safely be interpreted to constitute “farm stays.” Would love to get a firmer answer or confirmation either way. Thanks!!!