The Numbers Behind the Deal
The sticker price is only part of the picture. Buying — and later selling — property in Mexico carries predictable costs and taxes. Knowing them upfront lets you budget accurately and avoid surprises at the notary’s office.
In Mexico the buyer pays most closing costs, which typically total 5–8% of the purchase price. The largest components are the acquisition tax and the notary’s fees. Here is the breakdown:
Once you own, the annual property tax — the predial — is famously low in Mexico. It is often just 0.1–0.3% of the assessed value per year, and many municipalities offer a discount for paying in January. On a US$200,000 home you might pay a few hundred dollars a year — a fraction of US property taxes.
Rental income earned in Mexico is taxable in Mexico. If you rent your property short- or long-term, you register with the SAT (tax authority), charge and remit IVA (VAT) where applicable, and pay income tax on the profit. Many owners use a local accountant or property manager to handle compliance — essential if you list on platforms like Airbnb.
When you sell, Mexico levies capital gains tax (ISR) on the profit — generally up to around 35% on the gain, or a flat rate on the sale price, whichever the notary calculates as lower. Important exemptions exist: if the property is your primary residence and you have residency and tax documentation, a substantial portion of the gain (or the whole sale under a value cap, once every few years) can be exempt.
Because these rules hinge on residency, invoices for improvements, and correct declared values, the single best way to reduce future capital gains is to keep your paperwork clean from day one — declare the true purchase price and keep receipts for every renovation.
Typically 5–8% of the purchase price, dominated by the acquisition tax (2–4%) and notary fees (1–2%), plus registry, appraisal and — on the coast — the fideicomiso setup.
The predial is very low — often 0.1–0.3% of assessed value per year, with a discount for early payment. It is a small fraction of typical US property taxes.
Yes, on the profit — up to around 35% of the gain. Primary-residence exemptions can dramatically reduce or eliminate it if you have residency and clean documentation. Keeping renovation receipts and declaring true values lowers your future bill.
The buyer pays the bulk of closing costs (tax, notary, registry). The seller is generally responsible for capital gains tax and any brokerage commission.
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