Mexico – Property Taxes

What taxes and fees apply when buying property in Mexico?

In Mexico, the buyer shoulders the bulk of the closing costs when completing a property purchase — an arrangement broadly analogous to stamp duty and conveyancing charges in other jurisdictions, though structured quite differently. For a residential purchase, these costs typically amount to somewhere between 5% and 10% of the agreed sale price. Knowing what each element represents allows you to plan your budget with confidence from day one.

Property Acquisition Tax (ISAI): The largest single cost is the Impuesto Sobre Adquisición de Inmuebles (ISAI), a one-off transfer tax levied on the buyer. Property owners must also pay Predial — an annual charge — but the ISAI is paid once, at the point of acquisition, with its rate determined by the assessed value and precise location of the property. The acquisition tax generally falls in the range of 2% to 5% of the purchase price. The applicable rate is set independently by each state and municipality, so it will differ according to where the property sits — check the prevailing local rate with the relevant state authority or your notary before committing.

Notary fees: Every property transaction in Mexico must be formalised before a Notario Público, a specialist public legal official whose responsibilities extend far beyond those of a standard solicitor or conveyancer in most other systems. The Notario Público is the central professional figure in any Mexican property purchase or sale. Notary fees are governed by state law and generally fall around 1–2% of the property value, with variation between states. Always request an itemised fee estimate before proceeding.

Registration and appraisal fees: The buyer is also responsible for registering the title deed at the Public Registry of Property. Registration charges are relatively modest but differ from state to state. An official property valuation (avalúo) is a compulsory part of the process and typically costs several thousand pesos, depending on the size and location of the property.

Legal fees: Although the notary handles the formal legal execution, many buyers — particularly those unfamiliar with Mexico’s property system — also engage an independent property lawyer (abogado). Legal fees are agreed privately and commonly run to around 1% of the purchase price for a standard residential transaction, though they vary considerably.

Worked example — approximate buyer closing costs on a 5 million MXN property (as of 2025):

These figures are for illustrative purposes only. Confirm all current rates with the relevant state government, the Servicio de Administración Tributaria (SAT), and your appointed notary before proceeding to exchange.

Important note on declared values: It has historically been common practice to record a property’s value on the deed at well below its actual market price; doing so reduces both transfer taxes and property taxes at the time of purchase, and a suppressed recorded value can also benefit the seller by limiting apparent capital gains on the transaction. Be aware, however, that under-declaring values carries legal risk and can generate a substantially larger capital gains liability when you eventually sell.

What taxes and fees apply when selling property in Mexico?

When the time comes to sell your Mexican property, the buyer will absorb most of the closing costs — but sellers face their own set of obligations and charges that must be factored in. The three principal costs for a seller are capital gains tax, real estate agent commission, and expenses connected to the notary — each is covered in greater detail below.

Real estate agent commission: Where an agent is engaged, commission is customarily 4–6% of the sale price plus 16% VAT (IVA) applied to that commission, though the rate is negotiable. The agent’s fee, on presentation of a validated factura, is fully deductible against capital gains, making it one of the most advantageous deductions a seller can claim at the point of closing.

Capital gains tax: This is generally the seller’s most material financial obligation and is calculated by the notary at closing. Full details on rates, exemptions, and a numerical example are set out in the dedicated section below.

Notary and deed costs: Certain notarial charges at the time of sale — such as the preparation of the sale deed — may be allocated to the seller or shared between the parties depending on what is agreed. In practice, buyers bear the majority of notary costs, but sellers should clarify the division with their notary before the sale is finalised.

Fideicomiso cancellation fee: Where the property is held within a bank trust (fideicomiso), as is common for properties in coastal and border regions, a trust cancellation fee payable to the bank will need to be budgeted for; the precise amount varies, but sellers should expect to set aside around US$1,000 to cover this charge.

Outstanding predial: Annual property taxes (predial) must be fully settled before title can pass to a buyer, so ensure your predial account is up to date before putting the property on the market. Any outstanding amounts are the seller’s responsibility to clear prior to completion.

Is capital gains tax payable on property sales in Mexico?

Mexico levies capital gains tax on both residents and non-residents when assets — including real estate, shares, and certain investments — are disposed of at a profit. Tax due on the sale of residential property in Mexico is calculated by the Notario Público, who also withholds the relevant amounts and transfers them directly to the Mexican Treasury. Because each notary bears direct personal liability for any taxes owed on transactions they handle, they will rigorously ensure that all applicable rules have been observed and that sellers can substantiate any exemptions or deductions they are claiming.

Rates for tax residents: Mexico applies capital gains tax on residential property at either 25% of the gross sale proceeds without any deductions, or at a progressive rate between 1.92% and 35% applied to the net gain — calculated as the acquisition cost less allowable exemptions and deductions. The applicable percentage rises on a sliding scale relative to the size of the gain; for residential sales generating a gain above 250,000 Mexican pesos, a rate of 35% is broadly applicable and should be treated as the working assumption.

Rates for non-residents: When a non-resident sells Mexican real estate, two routes are available: pay a flat 25% on the gross sale price with no deductions permitted, or pay 35% on the net gain after allowable deductions. The second option is usually preferable, but this depends on the documentation available to support deductions. This approach is broadly analogous to non-resident withholding regimes in countries such as Canada or Australia — though Mexico’s specific rates and mechanics operate differently.

Primary residence exemption (residents only): Resident property owners holding a Mexican tax ID (RFC) may exclude up to 700,000 UDIs (inflation-adjusted units of account) from capital gains — equivalent to approximately 5–6 million pesos as of 2025. This exemption is available once every three years. To qualify, the property must be the seller’s primary home, the land must not exceed three times the built area (measured in square metres), and the three-year interval between claims must be respected.

Residency and the exemption: Mexico’s income tax legislation does not spell out explicitly whether a foreign seller must hold temporary or permanent residency to benefit from capital gains exemptions; it requires only that the property being sold is the seller’s primary residence. The notary handling the transaction will apply their own interpretation of the law: some will extend the exemptions only to sellers with residente permanente status, while others may apply them to sellers holding residente temporal status as well.

Allowable deductions: The taxable gain is arrived at by subtracting the inflation-adjusted proven acquisition cost, the inflation-adjusted cost of any construction work, improvements, and extensions carried out on the property, and notary expenses, taxes, and deed fees incurred on both purchase and sale.

Important currency note: Capital gains are computed exclusively in Mexican pesos. Exchange rate movements can affect — and in some cases create — a taxable gain when viewed in a foreign currency, because the tax calculation is denominated in pesos rather than dollars or any other currency.

Worked example — non-resident seller (as of 2025):

In this scenario, Option B (the net gain method) yields a considerably lower tax liability. Individual circumstances vary, so always seek guidance from a qualified Mexican tax attorney or accountant. Verify current rates and deductible items with the SAT.

Are there annual property taxes in Mexico?

Mexico’s annual property tax is known as Predial, and it applies to all real estate owners. Every person who holds property in Mexico — whether a Mexican national or a foreign citizen — is obligated to pay Predial. This extends to residential, commercial, and undeveloped land alike. Even where property is held through a fideicomiso bank trust, the beneficial owner remains responsible for settling this tax.

How it is calculated: Predial is based on the cadastral (assessed) value of a property, which is typically well below market value, with the applicable rate set by each municipality. The cadastral value — the municipal government’s official valuation — generally represents somewhere between 20% and 60% of what the property would actually fetch on the open market. This keeps effective tax burdens substantially lighter than equivalent levies in many other countries. Unlike council tax in the UK, which operates as a flat rate within property bands, or US property tax, which typically runs at 1–2% of market value, Mexico’s predial is calculated on a fraction of market worth.

How much will I pay? As of early 2026, annual predial in Mexico is strikingly low — typically between 0.05% and 0.3% of cadastral value. For a mid-range home with a market value of 5 million MXN, this might translate to just 3,000 to 15,000 MXN per year (roughly 170 to 860 USD). Across the board, annual property tax in Mexico realistically spans from around 1,500 MXN for modest homes to 60,000 MXN or more for high-value coastal or urban properties with updated assessments.

Payment process: In contrast to many other countries, Mexican authorities do not send out automatic property tax bills. Owners are simply expected to be aware of their obligation and fulfil it without a reminder. Predial is payable annually — typically in person at the local tax office or via authorised online portals — with payment due by the end of February.

Early payment discounts: A large number of Mexican municipalities reward prompt payment with discounts of between 10% and 25% on predial for owners who settle in January or February. Some localities also offer reductions or exemptions for senior citizens, retirees, or social housing residents. Qualifying seniors with appropriate documentation may be eligible for reductions of up to 50%, with further concessions available for those with certified disabilities.

How is rental income from property taxed in Mexico?

The tax treatment of rental income in Mexico turns primarily on whether the landlord is classified as a tax resident or a non-resident. Spending more than 183 days in Mexico within a calendar year qualifies an individual as a tax resident, subject to taxation on worldwide income. Non-residents are taxed only on income that arises within Mexico.

Tax residents: Resident individuals are taxed on rental income from all sources globally. They may deduct actual expenses attributable to the rented property — including depreciation on the building at 5% of its inflation-adjusted cost, property taxes, insurance, maintenance expenditure, inflation-adjusted loan interest on purchase or construction financing, and commissions paid. As an alternative, resident individuals may opt for a standard deduction of 35% of gross rental income plus real estate taxes in place of actual expenses and depreciation. Net rental income after deductions is then subject to Mexico’s progressive income tax rates, which begin at 1.92% and can rise to 35%.

Non-residents: As of early 2026, non-resident landlords are generally subject to withholding tax on their Mexican rental income; where no deductions are claimed, the applicable rate is 25% of gross rental receipts, in accordance with SAT guidance. This broadly resembles non-resident landlord withholding frameworks in countries such as Ireland or the UK, though the mechanics and specific rates differ.

VAT on rental income: Non-residents are required to pay value added tax (IVA) on income derived from leasing real estate other than a standard residential dwelling. IVA also applies where property is rented furnished or where it functions as a hotel or lodging establishment. The standard IVA rate stands at 16%.

Short-term rentals (Airbnb and similar platforms): Letting through short-term holiday platforms — including Airbnb, Vrbo, and Booking.com — is classified as a commercial activity in Mexico and typically attracts both income tax and IVA. Since 2020, digital platforms operating in Mexico have been required to withhold and remit certain taxes on behalf of hosts; the platform itself may deduct a portion of IVA and income tax from each payment before disbursing funds. Hosts should confirm withholding arrangements directly with their platform and report all income to the SAT. The rules governing digital platforms have evolved and remain subject to change — consult the SAT website or a local tax adviser for up-to-date guidance.

Registration obligation: To take advantage of expense deductions, landlords must maintain electronic accounting records accessible to the Mexican tax authorities. This requires obtaining an RFC (tax identification number) and issuing official digital invoices (CFDI/facturas) for all rental receipts.

Does inheritance tax apply to property in Mexico?

Mexico does not levy a dedicated federal inheritance tax or estate duty. This sets it apart from many other countries that impose succession taxes — such as the UK’s inheritance tax (charged at 40% above applicable thresholds) or the US federal estate tax (charged on estates exceeding a federal exemption amount). That said, the absence of a specific inheritance charge does not mean that property passes to heirs entirely free of any tax consideration.

Capital gains on inherited property: Inherited property is not subject to capital gains tax at the moment of inheritance itself. However, once the heir decides to sell, capital gains tax will become payable on the difference between the original acquisition cost as recorded in the inheritance deed and the eventual sale price. It is therefore essential for heirs to ensure that the property is correctly recorded at its full value at the time of inheritance, so as to reduce potential capital gains exposure in the future.

Income tax on inheritance: Under Mexico’s Income Tax Law, amounts received by way of inheritance are specifically excluded from taxable income at the federal level. Certain states previously maintained their own inheritance levies, but these have largely been abolished. Always confirm with a local legal adviser whether any state-level charges remain applicable in the jurisdiction where the property is situated.

Non-resident heirs: Foreign heirs who inherit Mexican property are subject to the same succession and registration process as Mexican nationals. The title deed must be updated at the Public Registry of Property following the completion of probate. When acquiring property, it is worth discussing estate planning with your notary at an early stage — structuring arrangements correctly and keeping thorough records will ensure that you and your heirs are well positioned when the time comes to sell.

Tax treaties: Mexico maintains double tax treaties with a number of countries. These generally address income tax and capital gains matters rather than inheritance or estate tax, given that Mexico does not levy a federal inheritance charge. If you are potentially liable for estate or inheritance tax in your country of residence or citizenship on foreign-held assets, you should obtain advice in that jurisdiction as to whether any credit or relief is available for charges paid in Mexico. The SAT provides information on Mexico’s treaty network at sat.gob.mx.

Does gift tax apply to property transfers in Mexico?

Mexico does not operate a standalone federal gift tax. However, the absence of such a tax does not render property gifts entirely free of fiscal consequences — the precise tax treatment depends on the relationship between the person making the gift and the recipient, and on how any eventual gain from future disposal is treated.

Income tax on gifts: Under Mexico’s Income Tax Law, gifts received from immediate family members — spouses, ascendants, and direct-line descendants — are generally exempt from income tax for the recipient. Gifts involving other parties may be treated as taxable income for the recipient, subject to assessment at standard income tax rates.

Capital gains implications for the donor: Transferring property by way of gift is treated as a disposal for capital gains purposes where the transfer occurs at undervalue or for no consideration. The notary will assess whether capital gains tax applies to the transfer, using the same calculation methodology as for a standard sale. Where the gift takes place between qualifying family members and the property represents the donor’s primary residence, the primary residence exemption rules may apply — subject to the conditions described in the capital gains section above.

Notary and registration fees: All property transfers by gift must be formalised before a notary and registered at the Public Registry of Property. Standard notary fees and registration charges apply, assessed on the declared value of the property.

Given the interplay between gift tax rules, capital gains liability, and inheritance planning considerations, it is strongly recommended that you consult both a Mexican notary and a tax attorney before proceeding with any property gift. Verify current rules with the SAT or a qualified local adviser, as the interpretation and practical application of these provisions can vary.

Are there any tax advantages or incentives for buying property in Mexico?

Mexico offers several meaningful tax advantages that make property ownership comparatively attractive when set against higher-tax jurisdictions — although structured incentive programmes targeting first-time buyers or specific investor groups are limited at the federal level.

Very low annual property tax: Mexico’s predial stands out for its exceptionally low cost, representing a significant attraction for foreign investors. The combination of modest cadastral values and low applicable rates means that the annual cost of holding property is a small fraction of the equivalent burden in many comparable markets.

Primary residence capital gains exemption: As explained above, resident owners selling their principal home may exempt up to 700,000 UDIs — approximately 5–6 million pesos as of 2025 — from capital gains tax. Importantly, this figure can effectively be doubled where the property is co-titled with a resident spouse or qualifying family member. If the same home is properly registered in the name of a spouse or other family member who is also resident in Mexico with their own RFC, and who uses the property as their primary residence, an additional 700,000 UDIs can be deducted in their name.

Deductibility of improvements: The cost of capital improvements carried out during ownership — including extensions, new flooring, swimming pools, and additional rooms — as well as certain closing costs from the original purchase, may all be deducted in calculating the taxable gain when the property is eventually sold. Retaining official invoices (facturas or CFDI digital receipts) for every item of qualifying expenditure is indispensable.

Rental expense deductions: Resident landlords may opt for a standard deduction equal to 35% of gross rental income plus real estate taxes in place of tracking and deducting actual expenses. This simplifies tax compliance considerably for those who do not maintain comprehensive expense records.

Early payment predial discount: Many Mexican municipalities offer reductions of between 10% and 25% on predial for owners who pay in January or February. Claiming this discount each year is a straightforward, recurring saving available to every property owner.

Social housing and INFONAVIT programmes: Mexico’s national workers’ housing fund (INFONAVIT) provides subsidised mortgage financing for eligible workers. These programmes are primarily directed at Mexican employees contributing to the social security system and are unlikely to be accessible to most foreign expat purchasers — but understanding them is worthwhile for those formally employed in Mexico.

Do different rules apply to foreign buyers or non-residents purchasing property in Mexico?

Foreign nationals have the legal right to purchase property in Mexico, but there are important structural rules, geographic restrictions, and additional compliance obligations that Mexican citizens do not face.

The restricted zone and fideicomiso: Mexico’s constitution bars foreign nationals from holding direct ownership of property within 50 kilometres of a coastline or 100 kilometres of an international border — areas collectively referred to as the “restricted zone.” Foreign buyers wishing to acquire within these zones must do so through a fideicomiso, a bank trust arrangement under which a Mexican bank holds legal title on the buyer’s behalf. Even where property is held via a fideicomiso, the beneficial owner remains responsible for all property taxes. Outside the restricted zone, foreign buyers may hold property directly in their own name. Foreign-owned corporate entities may also hold restricted zone property directly under certain structures — take specialist legal advice to determine which approach is most appropriate for your circumstances.

Fideicomiso costs: Establishing and maintaining a fideicomiso involves an annual trust fee payable to the bank, typically between US$500 and US$800 per year as of 2025, together with a setup fee at the time of purchase. Buyers should also be aware that some bank trustees automatically levy 25% tax on the full sale price before transferring title to a new buyer, without allowing deductions. It is therefore important to understand your bank trustee’s approach to capital gains handling at the time of setting up the trust.

RFC (tax ID) registration: Foreign buyers intending to let their property, or who wish to access the primary residence capital gains exemption on an eventual sale, must obtain a Mexican tax identification number — the RFC (Registro Federal de Contribuyentes). The primary residence exemption available under Mexican Income Tax Law requires that the seller be a citizen or a temporary or permanent resident in Mexico who holds a Mexican RFC.

Capital gains — no primary residence exemption without residency: If you are not a Mexican tax resident and/or do not hold a Mexican RFC, the primary residence capital gains exemption is not available to you — though deductions for qualifying expenditure can still be claimed provided you hold the relevant official receipts (facturas). Non-residents selling property are therefore subject to either 25% on gross proceeds or 35% on net gain, with no equivalent of the resident primary residence relief.

Higher capital gains withholding without representation: A non-resident who does not hold an RFC or CURP will be subject to capital gains tax at 35%. Engaging a Mexican tax representative and securing an RFC can materially improve your tax position.

No surcharges or additional transfer taxes for foreigners: There are no purchase-stage surcharges directed specifically at foreign buyers — the ISAI acquisition tax is charged at the same rate regardless of the purchaser’s nationality. The fideicomiso structure does, however, introduce costs that Mexican citizens purchasing within the restricted zone do not encounter.

For all property transactions, foreign buyers are strongly encouraged to engage both a qualified Mexican notary and an independent property attorney before signing any documentation. The SAT and the Public Registry of Property are the key official bodies for registration and tax compliance matters.

Frequently asked questions: property taxes in Mexico

Do I need a Mexican tax ID (RFC) to buy property in Mexico?

An RFC is not a prerequisite for purchasing property in Mexico. However, you must be a legal resident holding a Mexican RFC to access the primary residence capital gains exemption when you eventually sell. An RFC is also required if you intend to let the property and wish to claim expense deductions. Foreign buyers are strongly encouraged to apply for an RFC at the earliest opportunity. Visit the SAT for current application procedures.

What is a fideicomiso and do I need one?

A fideicomiso is a bank trust arrangement used by foreign nationals to hold property within Mexico’s restricted zone — that is, within 50 km of a coastline or 100 km of an international border. If you are purchasing outside the restricted zone, you may hold the property directly in your own name without a fideicomiso. If your purchase is in a coastal or border area, the fideicomiso is the standard requirement for foreign buyers. Your notary will advise you on the specifics of your situation.

How is the predial property tax paid, and what happens if I miss the deadline?

Mexican authorities do not automatically issue property tax bills — owners are simply expected to know their obligation and meet it without prompting. Payments fall due annually, typically by the end of February. Missing the deadline results in penalties and accrued interest. Where possible, pay in January or February to take advantage of early payment discounts of up to 25%. Check current rates and deadlines with your local municipal office or on your municipality’s online payment platform.

Can I offset Mexican property taxes against tax in my home country?

This is governed entirely by the tax rules of your home country. Many jurisdictions offer a credit for foreign taxes paid on overseas income, but the specifics vary widely. Under US tax law as it currently stands, property taxes paid in Mexico are not deductible on a federal return for the period 2018 through 2025, as the Tax Cuts and Jobs Act restricts the deduction for property taxes to US properties only. Consult a tax adviser with qualifications in both Mexican and your home country’s tax law.

Is there inheritance tax if I leave my Mexican property to my children?

Mexico levies no federal inheritance tax, so property passing to heirs upon death does not attract a separate estate or succession charge in Mexico. When heirs ultimately sell the property, however, capital gains tax will become payable. Inherited property is not subject to capital gains at the point it passes to heirs. To minimise future exposure, heirs should ensure the property is recorded at its full value in the inheritance deed. A notary and local attorney can advise on estate planning arrangements.

Do Airbnb rentals attract different taxes compared to long-term lets?

Yes. Short-term holiday rentals through platforms such as Airbnb are classified as a commercial activity in Mexico and attract both income tax and IVA (16% VAT) — a charge that does not generally apply to standard long-term residential lettings. Since 2020, digital rental platforms have been required to withhold and remit certain taxes on behalf of their Mexican hosts. Long-term residential leases are not subject to IVA, though income tax still applies to the rental proceeds. Consult the SAT for current guidance on your particular circumstances.

What documents do I need to keep in order to minimise capital gains tax when I sell?

Retaining every receipt and digital tax invoice (CFDI) from the day you purchase is the most effective way to reduce your taxable gain at the point of sale. The key documents to preserve include the original purchase deed, official invoices for all capital improvements made during ownership, agent commission invoices, and evidence of residency if you plan to claim the primary residence exemption. Without official facturas, the notary will typically disallow deductions at closing.

Where can I find official information on property taxes in Mexico?

The main official sources are: the Servicio de Administración Tributaria (SAT) for federal income tax and capital gains obligations; your relevant state or municipal government office for predial rates and payment procedures; and the Public Registry of Property for registration requirements. For advice specific to your transaction, always engage a qualified Notario Público and, where appropriate, an independent Mexican tax attorney.