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Did you know that the first $75,000 you earn worldwide is completely tax-free (no federal nor state-income tax is withheld)? For more info on savings in Mexico please Click Here.

Taxes

Below we have provided you with an overview of some of the applicable taxes in Mexico. For more information on retiring in Mexico go to our sister site www.mexretire.com

Real Estate Taxes

While in the USA property taxes will vary by state but are often in the range of 2 – 3%, in Mexico, taxes are generally 0.2% - 0.3% thereby saving you 10 times what you would pay in the us on yearly property taxes. For more info on savings in Mexico, Click Here.

Income taxes

If you work in Mexico and receive income from a Mexican-sourced income, you will need to pay personal income tax in Mexico and file a Mexican tax return each year. If you are a United States citizen or a US green-card holder, you must also file a tax return in the United States, if your income (all your income worldwide, not just your US income or Mexican income alone) exceeds a low minimum threshold (see your tax professional or the IRS to find out the threshold for your filing status); however, the United States has agreements with most countries, including Mexico, so that you won’t be liable for double taxation (in other words, you would not pay taxes twice). Also, your first $75,000 should be exempt from US federal income tax (this varies from year to year, so again check with your tax professional or the IRS.) We advise you to consult with your tax advisor on these matters, and preferably with an international tax planner in your home country. Click here for a list of international and expatriate tax experts you can contact through www.mexretire.com.

Sales Tax/Value-added Tax

Value-added Tax (IVA, or Impuesto al Valor Agregado) adds 10- 15% to the cost of most goods and services in Mexico.

Inheritance & Gift Tax

Mexico does not charge an estate or inheritance tax; however, gifts of real estate, if they are not gifts to your husband, wife, or immediate family, may be taxable, with the tax to be paid by the recipient of the gift. Please consult with your tax advisor before making a gift of your Mexican real estate.

Transfer Tax

Property that’s transferred, sold, donated, subdivided, merged with another property, or placed in trust, is subject to an Acquisition Tax of 2% of the assessed value of the home.

Capital Gains Tax, or ISR (Impuesto Sobre la Renta)

When buying property, the seller pays the Capital Gains Tax, or ISR, unless the buyer has agreed to do so. The Mexican Notario (Notary Public) will advise you of the amount. If you sell your Mexican home, you are not liable for Capital Gains Tax provided the home has been your primary residence for at least the past two years. Otherwise, you are liable for Capital Gains Tax at a rate of 20% of the declared value of the transaction, or 40% of the net gain on the sale of the home, less the value of improvements made, commissions paid, and certain other allowable deductions.

Rental Income Tax

If you rent out your property, but reside outside of Mexico, your rental fees are taxable at a rate of 21% in Withholding Tax. If you rent out your property but do reside in Mexico, your rental fees are taxable at regular personal income tax rates.

For more information on retiring in Mexico go to our sister site www.mexretire.com

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