You’ll pay several taxes associated with real estate in Mexico. The first is a 2% acquisition tax, payable by the buyer when the property changes hands. And as a property owner, you’ll owe property tax.
It’s common in Mexico to use the “assessed” value of the property as the basis for these taxes, and the official assessment can be considerably lower than the market value of the property — often only 30%-40% of the actual sale price. So on a $100,000US property that has an official “assessed” value of $40,000US, you’ll pay $800 in acquisition tax and something between $50-$150US annually for your property tax.
If you sell the property, you’ll owe capital gains tax. This can be figured two ways in Mexico:
- You can pay 25% of the declared value of the transaction; or
- You can pay 35% of net value — the difference between the assessed values at the time you bought the property and when you sell it, taking into consideration the time the property was held, any improvement made, any commissions paid and other allowable expenses. If there is a significant difference between the assessed value recorded for the property when you bought it and the value you claim; when you sell it, you could be in for a big tax bite.