In some cases, sale of a rental could be considered a business, therefore the 40% deduction would be valid. I received an update today 2/27/26, with a new "Total Capital Gains" section in the State of NM Step by Step. If you enter the Capital Gains Amount in "Gain on sale of business assets" the Business flag on NM PIT-ADJ line 16B gets set and the 40% deduction is calculated.
