By Angel Marin Diaz
Dianne from San Francisco, CA.
Hi Angel, my question is if I am renting my house here in Mexico do I have to pay taxes on the rental income, and if yes do I have to pay again in the USA?
AMD – Hello Dianne,
The quick answer is yes to Mexican taxes. I would like to elaborate though, there are new taxation (municipal) laws in place as of 2019 for those people renting through platforms such as Air B&B, Bookings.com, and so forth. These taxes apply to rentals that average under 30 days. There are also permits required that to be granted you must show proof of liability insurance. As for long term rentals (over 30 days) taxes must also be paid but in a different bracket.
Double taxation is prohibited by mutual agreement between countries. You first pay your proportional part to the Mexican taxation and revenue (S.A.T), as well as municipal and state taxes, then you can use your Mexican tax declaration to file for your US taxes for income earned abroad.
Make sure you have a Fiscal Accountant which is different than a CPA (Contador) as a fiscal accounting attorney will be up to date on all the tax reforms that we have experienced since Lopez Obrador became president. This will ensure properly filed declarations and save potentially high fines as well as interest on improperly filed returns.
Rick from Santa Barbara, CA.
Angel, I purchased a property in the last quarter of 2020, a local real estate brokerage ran the closing of the home purchase here in San Miguel de Allende. I was astounded at the closing costs incurred as the buyer (6.5 percent). Is this normal?
AMD – Hi Rick
I will try to explain this as best as possible and invite you to contact me directly for a more detailed explanation. The city of San Miguel instituted a transmission of a real property tax called Article 7 which is a sliding-scale tax for the sale of a property charged to the buyer. The tax starts at 2 percent for a home of an appraised value of US$25,000 and increases to 4 percent for any property sale exceeding US$75,000. This means that you paid 2.5 percent in legal and notarial fees. We at Inmtec Legal Services never exceed 6 percent as we do a high volume in closings, so I would not feel ¨ripped off¨ or taken advantage for the half point that you paid as stated above. Also, I should mention that Cancun buyers are paying 8 percent and in los Cabos up to 10 percent.
Thank you all for your questions this week. For more specific information on real estate purchases, fiscal planning for closing costs and capital gains, rental taxation, permits and estate planning as well as all notarial services please contact the author:
Angel Marin Díaz at email@example.com 4150 121 9005 and 754 107 0163.