What’s exciting about buying a property down in Mexico is appreciation potential. It is growing every month, every six months, every year. Currently, there’s a record number of people inquiring about how to invest and own property down in Mexico. And this is because everybody is thinking, what can I do to battle inflation? However, when you sell your house in Mexico, you also have some expenses.
If you want to invest in real estate in Mexico with the goal of selling the property in the future, you need to keep track of these expenses.
Capital Gain Tax in Mexico
When you sell your house in Mexico, you have to declare the income you receive to prove that the sale is legal. Therefore, you have to pay the ISR, capital gain tax in Mexico.
The notary public will calculate this tax, and you must pay it to him in the deed process. In the case of legal entities, capital gain is also taxed and is added to their other income.
Is it possible to exempt this tax or deduct expenses to decrease the profit and pay a lower tax?
You must consult your notary to review your case. However, we can say that it is possible to exempt the payment of this tax if the income obtained from the sale of your house does not exceed 250,000 USD. Thus, as long as you can prove that you live in that house with the receipt of electricity, telephone, bank, business, or credit card statements or identifications with the address. The proof documents could be under the name of the taxpayers, their spouses, ascendants, or descendants. This tax can be exempted only once every five years.
If you can’t get the exemption, you may be able to deduct concepts like:
- Proven acquisition cost, this is what it costs you to acquire the property. If you bought the property before April 2014, you could prove it with the deed. After that date, the notary must give you a supplement that accompanies your invoice with that information.
- Notarial expenses, for which you will need an invoice from the notary
- Commissions and mediations. That is, the amount paid to the real estate agent who made the sale, for which it is also necessary to have an invoice.
- Investments in construction, improvements, and extensions. To credit them as such, you will also require the corresponding invoices, the notice of completion of work, or an appraisal (in the latter case, only 80%).
Services and property taxes
If you sell your house in Mexico, one of the seller’s obligations is to ensure that the property does not have any outstanding debt that could directly affect the new owner.
Some common expenses that former owners forget to cover are essential services, as water and electricity. As well as important taxes, such as property taxes.
Non- Encumbrance Certificate
Likewise, you need a Non- Encumbrance Certificate that indicates that the property is in legal conditions for sale and does not have any problems with the country’s financial authorities.
Other expenses when you sell your house in Mexico
In some cases, sellers must also make an appraisal of their property to determine the fair price they will ask for it. However, this requirement depends on the purchase option offered to the interested party in the property.
With this information, you will be ready to sell your house in Mexico without further problems. Plan the extra expenses you will have to make. Thus, you will be able to carry out this real estate process from beginning to end without unexpected mishaps.
