Saturday, August 15, 2015

Taxes in Mexico on Rental Properties - How to Get Into Compliance?

If you own a rental property in Mexico, the income and expenses from that property are reportable on your US tax return and in Mexico.  The tax reporting in the US is very much the same as a rental property located in the US, but you must depreciate the property over a 40 year period.

Over one-half of the Canadians and Americans who rent their Mexican properties are not paying their Mexican taxes on that income. What are those taxes you owe?

  • IVA which is 16 % of your gross rental income (deductible on US return)
  • Local Lodging Taxes (if it applies) in the City where the property is located (deductible on US return)
  • Mexican income tax on rental income (can be credited against US tax on this income)
These Mexican taxes must be reported and paid monthly to the Hacienda and other applicable local taxing agencies.  Most of this is done on line on the internet.  Failure to do so can result in penalties and potential criminal prosecution.

In some areas of Mexico the taxing agencies search the internet for properties for rent, locate the properties and check to see if the taxes are all being paid on the rental income.  This technique is likely to spread to other areas of Mexico as time passes.

If you are not a resident of Mexico, there are additional rules and complications paying these taxes. If you wish to get into compliance, please email us at and we can guide  you to an excellent service the will file all tax report and pay the taxes for you.  Best to get into compliance with these Mexican tax laws before it is too late!  Further delay may be costly.

The Settlement Company offers the service of filing and paying rental taxes on Mexican rentals for nonresident owners. Read more at www.RentalTax 

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