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Other U.S. & Mexican Tax Issues

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MEXICAN TAX ISSUES

If you generate income in Mexico, for example by renting your Mexico house, you need to report that income on a Mexican income tax return. You do not have to pay double taxes, thanks to a tax treaty between Mexico and the United States. (You don’t have to pay tax to both countries, but you still have to report the income to both countries. You pay income tax to one country, then take a credit in that amount on your return in the other country.)

In other words, if you rent your Mexico house, you’ll need a Mexican accountant. Many good ones are available. I recommend using one with existing American clients who is already familiar with the particular issues pertaining to the filing of Mexican income tax returns by non-Mexicans. Another alternative is to hire a Mexico-based property management company. For a fee, they will take care of everything, from renting to taxes, so you don’t have to sweat the details.

OTHER US TAX ISSUES

Besides income tax, you may also want to consider US estate and gift taxes. Under current US law, if you are a citizen or resident of the US, your Mexican real estate will be included in your gross estate for tax purposes whether you hold title to the property outright or in a bank trust (see 26 U.S.C. Section 2033). If you give your property away, say to a family member, or allow them to live there rent free, these are considered gifts. If the annual value of the gifts is greater than USD $12,000, you will be subject to gift taxes (see 26 U.S.C. Section 2503(b)). Consult your tax preparer or financial planner to make sure you get the full benefit of your Mexican investment.

Wolf Property Management can offer you strategies to have in order your rental income and comply with the Mexican tax issues. Remember that all taxes you pay in Mexico are deductible in the US. Feel free to contact and ask us anything regarding this matter. If you need to manage all your income individually, Wolf Property Management can recommend you professional and trusted Accountants that may assist you thoroughly.

(*) This article is only intended to provide general information. It is not intended to be relied upon as legal, accounting, tax or other professional advice or services. Please consult with legal counsel and a tax advisor to address your concerns.