Taxes, Taxes, Taxes

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 Sit back and enjoy sipping a margarita, while reading a scintillating conversation about taxes!

In general, Mexico has structured their tax system to favor the poor. If there is an exchange of money, then the government will collect a tax. Annual taxes such as property taxes are very low so as not to be a burden on the large population that has a small cash flow.

Below are taxes that you are responsible for as a buyer, as a seller and as a homeowner in Mexico. That would include U.S. taxes as well.

As a Buyer:

• Traslacion de Dominio. Transfer Tax. This is a city/county tax paid for at the Tesoreria or Treasury. It's based on the bank appraisal and is paid after signing on the title but before registering the property.

As a seller:

• Impuesto Sobre la Renta. Capital Gains Tax paid at Hacienda, the Mexican IRS. If you have established residency in Mexico, and changed your status from tourist to Visitante (FM3) and can prove that the home you are living in is your primary home for more than two years, you can waive the Capital Gains. If you can't prove the above, the Capital Gains is 30% of the profit made on the home.

Living in Mexico:

• I.V.A. (pronounced "eeeba") Mexican Sales Tax. This 15% tax is on everything including services, bank appraisals, food (except certain staples), and products.


• Prediales Property Taxes. Owed every year in January, February, and March, these taxes are generally quite reasonable unless you have bare land. Even a shack thrown up on a bare lot will bring down the price quite a bit. If a property has not paid its taxes for five years and been abandoned, you can file for ownership of the property simply by paying up the back taxes. You won't get a bill for property taxes. It's assumed you know enough to go down to the city treasury to pay them. Be sure to take a copy of the prior year's taxes or the Numero Catastral or property tax number, as sometimes the names are incorrect. Not to worry about this detail: If you show you've paid the taxes, that's what counts.


• Mexican Income Tax If you earn money in Mexico or own a business that is making money in Mexico, you are expected to pay income tax to Hacienda. The U.S. also taxes you on your world-wide income, however, you can deduct what you pay in Mexico as an expense.

Tips for U.S. Taxes:

• Keep good records. Everything you spend to get title to your property, as well as capital gains tax for selling your home, can be deducted when you sell your home and have to pay capital gains in the U.S.


• You can rollover the sale of a property in the U.S. into another purchase in Mexico without paying capital gains. And vice versa. There is a time limit for purchasing again after selling, to qualify for this. Check with your accountant.