Yes. US citizens and green card holders must file federal income taxes every year, regardless of where they live. Moving to Mexico does not change this.
The Basic Rule
The United States taxes its citizens on worldwide income. This applies whether you live in San Diego, San Jose del Cabo, or anywhere else on the planet. If you are a US citizen or permanent resident, the IRS expects a return from you every year.
The regular filing deadline is April 15. If you live abroad, you automatically get an extension to June 15. File Form 4868 by June 15 to extend further to October 15. You do not need to request the initial two-month extension. It applies to all US citizens living outside the country.
How Do You Avoid Paying Taxes to Both Countries?
If you are also a Mexican tax resident (183+ days in Mexico per year), you potentially owe taxes to both countries. Three tools prevent true double taxation.
Foreign Earned Income Exclusion (FEIE)
The FEIE lets you exclude foreign earned income from your US taxes. For the 2025 tax year, the exclusion is $130,000. For 2026, the limit rises to $132,900. You claim it on Form 2555.
The FEIE applies only to earned income: salary, wages, self-employment. It does not apply to pensions, Social Security, investment income, or rental income. If your income comes from US retirement accounts, the FEIE does not help you.
To qualify, you must pass one of two tests. The Physical Presence Test requires 330 full days outside the US in any 12-month period. A “full day” means 24 consecutive hours. Day trips to San Diego do not break your count, but overnight stays in the US do. The Bona Fide Residence Test requires you to be a resident of a foreign country for an entire calendar year (January 1 through December 31).
Foreign Tax Credit (FTC)
The FTC lets you credit taxes paid to Mexico against your US tax bill. If you pay $8,000 in ISR to Mexico, you reduce your US liability by $8,000. You claim it on Form 1116.
The FTC works on all income types, not just earned income. This makes it more useful than the FEIE for retirees living on pensions and investment income. You can use the FEIE and FTC together, but not on the same dollars of income.
Foreign Housing Exclusion
If you qualify for the FEIE, you can also exclude certain housing costs above a base amount. This covers rent, utilities, and property insurance in Mexico. The base amount for 2025 is roughly $19,500 (16 percent of the FEIE limit). Housing costs above that base, up to a cap, are excludable.
What About FBAR?
If you have Mexican bank accounts, you likely need to file an FBAR (FinCEN Form 114). The FBAR is required if the combined value of all your foreign financial accounts exceeds $10,000 at any point during the year. This includes checking, savings, and investment accounts at Mexican banks.
The FBAR deadline is April 15 with an automatic extension to October 15. You file it electronically through the BSA E-Filing system, not with your tax return. It is a separate filing.
Penalties for not filing are severe. Non-willful violations carry fines up to $16,536 per account. Willful violations can reach $165,353 or 50 percent of the account balance, whichever is greater. The IRS enforces this aggressively.
What About FATCA (Form 8938)?
FATCA reporting applies if your foreign financial assets exceed higher thresholds. For expats filing from abroad, the thresholds are $200,000 (single) or $400,000 (married filing jointly) at year-end. The thresholds double if balances exceeded those amounts at any point during the year ($300,000 single, $600,000 joint).
Form 8938 files with your tax return, not separately like the FBAR. You may need to file both. They cover overlapping but not identical assets.
Do You Still Owe State Taxes?
It depends on which state you left. California continues to tax former residents if you maintain ties like property, a driver’s license, or voter registration. Texas, Florida, Nevada, and several other states have no state income tax.
If you left California for Mexico, formally establish your departure. Surrender your California driver’s license. Change your voter registration. Close California bank accounts. Update your mailing address. California’s Franchise Tax Board is known for pursuing former residents who do not cleanly break ties.
What About Social Security Income?
US Social Security benefits are taxable by the US based on combined income thresholds. If your combined income exceeds $25,000 (single) or $32,000 (married), up to 50 percent of your benefits are taxable. Above $34,000 (single) or $44,000 (married), up to 85 percent is taxable.
Mexico does not tax US Social Security under the US-Mexico tax treaty. You only pay US taxes on it.
What If You Have Not Been Filing?
The IRS offers the Streamlined Filing Compliance Procedures for expats who are behind on their returns. If your failure to file was non-willful, you file your last three years of tax returns and six years of FBARs. Non-willful means you did not know about the requirement. There is no penalty under the streamlined program for expats abroad.
This is a real program, not a trick. Thousands of expats have used it. But you must certify that your non-filing was not willful. If the IRS contacts you before you enter the program, you lose eligibility.
Who Should You Hire?
Use a CPA or enrolled agent who specializes in US expat taxes. General US tax preparers rarely understand the FEIE, FTC, FBAR, and FATCA interaction. Cross-border specialists charge $500 to $2,000 per year depending on complexity. This is not the place to save money. The penalties for errors or non-filing dwarf the cost of professional preparation.
Regulations and government processes change. This article reflects information current as of March 2026. For advice specific to your situation, consult a licensed immigration consultant or contact the relevant government office directly.