How to Avoid Paying Capital Gains Taxes in Mexico

Mexico’s capital gains exclusion for sale of real estate is similar to that of the United States.(Homestead excemption)

“There is no capital gains tax in Mexico if there is conclusive proof the seller has had the property as his or her primary residence for the previous two years” - Cashing in on a Second Home in Mexico by Tom Kelly

If you are a US citizen, you are still subject to US capital gains taxes which grants an exception of $250,000 for singles and $500,000 for married couples if you have owned and used the home as your main residence for at least two years out of 5 years leading up to the sale date. To keep it simple, just make sure you live at a location for at least two years, whether it is in the US or in Mexico so you can pocket all the profits from the sale. However, if you don’t meet the requirements, the penalty can be severe - as much as 28% or more.

You should also contact the local notario publico, because you may not be entitled to the capital gains exclusion if you are not considered a resident of Mexico. Check to find out the requirements to be considered a resident and whether you will be allowed to take the exemption.

Watch out for the seller not declaring the total sale price of the property you are buying. This could make you liable for capital gains taxes that the seller should have paid.

Disclaimer: This article is intended to educate on the basics of capital gains in Mexico. Consult a certified accountant for your specific tax situation.

Source: Cashing in on the Second Home by Tom Kelly and Mitch Creekmore

Source . www.mexicorealestateinvestment.org

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