Tax Exemption on selling your home in Mexico
According to Art. 93 of Title XIX of the Income Tax Code, if you sell your house, you can reduce the amount of the (real estate transfer) tax. However, in order to benefit from this exemption, certain requirements must be met. These are:
Being a resident of Mexico and having your own RFC.
The house to be sold must be your principal residence.
You can apply for a tax exemption every 3 years.
The tax exemption on the sale of homes will be up to 700,000 UDIS (investment units), whose value is subject to constant fluctuations and whose value may be consulted at any time through the official website of Mexican banks or banking institutions. Currently, the cost of the UDI is 8.251965 pesos per unit. This is equivalent to a tax exemption of up to 5,776,375.50 pesos, which can only be deducted from the total sales price of the property if it qualifies for this tax exemption. The advantage of this deduction, if you qualify, is that if your partner or family member is a co-owner of the same property to be sold and it is their primary residence then it is possible to get an additional 700,000 UDI to the same deduction.
*Important note: You cannot take this deduction automatically, you must be eligible in order to claim it. To do this, you must talk to a notary or a closer, which will help you in the application process and what documents to apply for this tax exemption.
According to Art. 93 of Title XIX of the Income Tax Code, if you sell your house, you can reduce the amount of the (real estate transfer) tax
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*It is important to explain that if you are a foreigner and do not have a certificate of residence in Mexico, you will not be able to claim this specific tax exemption. Some of the tax deductions you can claim as an expatriate include purchases made as part of home renovations, such as new flooring, swimming pool, structural additions, etc. This can be deducted as long as you live in and own the property you wish to improve. In order to do so, it will be necessary to prove these deductible expenses with invoices. Most people who do construction or decoration work do not issue invoices, so you will not be able to reduce the tax on this work.
Real estate prices in some regions of Mexico, such as Cabo San Lucas, are calculated in U.S. dollars, although when a real estate transaction is completed, the amount of the transaction is calculated in pesos based on the exchange rate on the closing date, according to the Official Journal of the Federation. This may have an impact on tax calculations when calculating the proceeds of a sale based on the exchange rate, since when selling real estate, the tax rate is calculated in Mexican pesos and not in U.S. dollars.
