If you spend more than 183 days per year in Mexico, you are a Mexican tax resident and owe taxes on your worldwide income. The rate ranges from 1.92 to 35 percent depending on how much you earn.
What Makes You a Mexican Tax Resident?
Mexico uses a 183-day rule. The SAT (Servicio de Administracion Tributaria) is Mexico’s tax authority. If you spend 183 days or more in Mexico during a calendar year, the SAT considers you a tax resident. Vacation days count. Every day on Mexican soil counts.
You can also become a tax resident through economic ties, even without hitting 183 days. The SAT may classify you as a resident if your primary home is in Mexico or if your spouse or dependents are Mexican tax residents. Earning more than 50 percent of your income from Mexican sources also triggers residency.
Tax residency matters because it determines what income Mexico can tax. Residents pay taxes on worldwide income. Non-residents pay only on income earned within Mexico.
What Taxes Do Expats Pay?
The main tax is the ISR (Impuesto Sobre la Renta), Mexico’s federal income tax. It applies to salary, business income, rental income, investment gains, and pensions. The ISR uses a progressive rate system with 11 brackets ranging from 1.92 percent to 35 percent.
At the low end, monthly income up to about 7,735 pesos (roughly $400 USD) is taxed at 1.92 percent. At the high end, annual income above 3.8 million pesos (roughly $190,000 USD) is taxed at 35 percent. Most expats with moderate income from US sources fall somewhere in the 10 to 21 percent range.
Mexico also charges a 16 percent IVA (Impuesto al Valor Agregado), the equivalent of sales tax. IVA applies to goods and services, not personal income. You pay it at the register, not on your tax return.
Do You Need an RFC?
Yes, if you are a tax resident. The RFC (Registro Federal de Contribuyentes) is your Mexican tax ID. You need it to open a bank account, sign a lease, buy property, or conduct most financial transactions in Mexico.
You obtain your RFC at a SAT office. In Tijuana, the SAT office is on Fuerza Aerea Mexicana s/n, CP 22410. In La Paz, the office is on Calle Ignacio Allende. Book your appointment online at citas.sat.gob.mx. Bring your passport, proof of address in Mexico, and your CURP if you have one.
Having an RFC does not automatically trigger tax obligations. But it puts you on the SAT’s radar. If you are a tax resident with an RFC, the SAT expects you to file.
What About US Taxes?
US citizens and permanent residents must file US federal taxes regardless of where they live. Moving to Mexico does not eliminate your US tax obligations. You file with both countries.
The US-Mexico tax treaty, signed in 1992 and updated since, helps prevent double taxation. Two main tools apply.
The Foreign Earned Income Exclusion (FEIE) lets US expats exclude up to $126,500 (2024 figure, adjusted annually) of foreign earned income from US taxes. This applies only to earned income like salary or self-employment. It does not apply to pensions, Social Security, or investment income.
The Foreign Tax Credit (FTC) lets you credit taxes paid to Mexico against your US tax bill. If you pay $5,000 in ISR to Mexico, you can reduce your US tax liability by that amount. The FTC often provides better relief than the FEIE for expats with higher incomes.
How Is Social Security Taxed?
US Social Security benefits are not taxed by Mexico under the tax treaty. You still owe US taxes on Social Security based on the standard US thresholds.
There is no totalization agreement between the US and Mexico. This means expats employed in Mexico may have to contribute to both countries’ social security systems. Self-employed expats face the same issue: US self-employment tax of 15.3 percent on worldwide earnings plus Mexican social contributions, with no offset between the two.
What About Pension and Investment Income?
US private pensions are generally taxed by the US under the treaty. Mexico typically does not impose additional tax on US-source pension income for residents.
Investment income (dividends, capital gains, interest) is more complex. As a Mexican tax resident, you technically owe ISR on worldwide investment income. The tax treaty provides credits to avoid paying full tax to both countries. Work with a cross-border tax professional to calculate this correctly.
What About Rental Income?
If you own property in Mexico and rent it out, that income is taxable in Mexico. The ISR rate on rental income ranges from 1.92 to 35 percent, the same brackets as regular income. You can deduct expenses like maintenance, property taxes, insurance, and fideicomiso fees.
If you rent out property in the US while living in Mexico, both countries may want to tax it. The FTC prevents true double taxation, but you need to file in both jurisdictions.
How Do You File?
The Mexican tax year runs January through December. The annual return (declaracion anual) is due in April. Monthly provisional payments (pagos provisionales) are due by the 17th of each month for certain income types.
Most expats hire a Mexican accountant (contador). A good contador costs 2,000 to 5,000 pesos per month ($100 to $250 USD). They handle your monthly filings, annual return, and ensure compliance with SAT requirements. This is not optional complexity. Mexican tax law is detailed and the SAT enforces it.
For US taxes, you still file by April 15 (with an automatic extension to June 15 for citizens abroad). Use a cross-border CPA who understands both systems.
What Happens If You Do Not File?
The SAT charges penalties and interest on late filings and unpaid taxes. Penalties range from 1,400 to 34,000 pesos depending on the violation. The SAT has become more aggressive in recent years about enforcement against foreign residents, especially those with RFC numbers and bank accounts.
The IRS does not forget about you either. US citizens abroad who fail to file face the same penalties as domestic filers. You also have additional reporting requirements for foreign bank accounts (FBAR) and foreign financial assets (FATCA Form 8938).
The Bottom Line
If you live in Mexico more than 183 days per year, you are a tax resident. Get an RFC. Hire a Mexican contador. File in both countries. The US-Mexico tax treaty and tools like the FEIE and FTC prevent true double taxation in most cases. But you must file to claim those benefits.
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.