# Taxes...?



## Howler (Apr 22, 2013)

I was exploring and came across the _Artio Partners_ ad & website. Then I spent the rest of the morning reading about taxes. I was disappointed to see how US citizens are taxed no matter where they live in the world, regardless of if they have to pay taxes to the foreign government where they reside. :doh:

However, I saw where the US government (if I interpreted it correctly) will allow a dollar-for-dollar deduction for taxes paid to a foreign government... at least in Mexico. Hmmmm...

My *main* question is this: Does it mean that you end up, on the average, paying 1) less; 2) about the same; or 3) still more in taxes than if you stayed & filed in the US??

*Also:*  :confused2:
1) How is paying Mexican taxes compared to the US system of taxation (easier or more complex)? 
2) Do you end up paying more or less than if in the US. 
3) When are Mexican taxes returns due?

Thanx for your answers!!


Dan


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## johnmex (Nov 30, 2010)

1. Depends on your situation. The average Jose doesn't even need to file. Middle income (me) has a pretty easy task. On line it takes less than an hour, a bit more if you have deductions to claim.
2. I don't know. I have never done the numbers.
3. Personal taxes have until April 30. eek!


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## Longford (May 25, 2012)

Howler, are you expecting to have income generated from within Mexico?


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## mickisue1 (Mar 10, 2012)

...And, Howler, you realize that there is a fairly generous amount of foreign income that's exempted before taxes need to be paid?

.........

But, after all, I assume that, should you be in a foreign country, and there were a terrible natural or man-made disaster, that you would expect the nearest embassy or consulate to come to your assistance. Any taxes you pay on income earned in that country are at least partially responsible for the US's ability to maintain that embassy. Right?


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## PanamaJack (Apr 1, 2013)

mickisue1 said:


> ...And, Howler, you realize that there is a fairly generous amount of foreign income that's exempted before taxes need to be paid?
> 
> .........
> 
> But, after all, I assume that, should you be in a foreign country, and there were a terrible natural or man-made disaster, that you would expect the nearest embassy or consulate to come to your assistance. Any taxes you pay on income earned in that country are at least partially responsible for the US's ability to maintain that embassy. Right?


Mickisue are you familiar with the operation of a U.S. Embassy? How much money it generates annually from visa applications? In Mexico they handle over 450,000 visa applications each year @ $160 a piece for the least expensive is US$72 billion. All that money is earned income that is NOT returned even if the applicant is denied his or her visa. I therefore find it highly unlikely that Howler's income taxes or any other U.S. citizen's income taxes that are paid while residing in Meixico are used for the operation of the U.S. Embassy in Mexico. Furthermore, it is the birth right of all U.S. citizens to be protected by the U.S. government within its borders and to give the best possible protection outside its borders regardless of the dollar amounts they pay annually in taxes. As U.S. citizens our taxes dollars are not being used to run the U.S. Embassy in Mexico or any other embassy in the U.S. diplomatic system and I can assure of that.


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## sparks (Jun 17, 2007)

Longford said:


> Howler, are you expecting to have income generated from within Mexico?


That is the only question


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## Howler (Apr 22, 2013)

Longford said:


> Howler, are you expecting to have income generated from within Mexico?


I realize everyone is in a different or similar financial situation, I was just looking for general answers as to what everyone usually encounters when they do their taxes.

As for me, I don't plan to generate income in Mexico; I will have as income:

1) a military pension; 
2) a VA disability; 
3) Social Security Disability; and 
4) a work-related disability payment... all adding up to $5K to $6000 a month. 

My wife won't draw Social Security for another 10 years or so. We plan to own a home eventually in both the US & in Mexico - nothing fancy, but adequate for our needs & semi-annual occupations. I don't see either home being worth more than, say, $125,000 to $150,000 *at the most* for either home.

We are looking at making a move from Oklahoma to Virginia for our US home-base, so that may affect our state taxes, too.


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## mickisue1 (Mar 10, 2012)

Howler said:


> I realize everyone is in a different or similar financial situation, I was just looking for general answers as to what everyone usually encounters when they do their taxes.
> 
> As for me, I don't plan to generate income in Mexico; I will have as income:
> 
> ...


You can NOT have a US residence, and then the only taxes are federal. You must have an address in the US for mail, but it doesn't need to be YOUR address.

As for paying the taxes, though. Given that all the income you will have is either from the US government, or a US insurance company, of course there are federal taxes!


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## johnmex (Nov 30, 2010)

Howler,

IMHO, it sounds like the only taxes you will be paying in Mexico is the 16% VAT...


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## sparks (Jun 17, 2007)

>>>> You can NOT have a US residence, and then the only taxes are federal. 

No income tax in Washington and many other states. I only pay Federal


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## Longford (May 25, 2012)

Howler said:


> As for me, I don't plan to generate income in Mexico.


Then the question is moot. No income generated in Mexico, no Mexican taxes due. Next question?


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## johnmex (Nov 30, 2010)

It seems that I will be getting a refund of about 13K pesos this year. Now...what to do with the extra cash...


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## Howler (Apr 22, 2013)

Longford said:


> Then the question is moot. No income generated in Mexico, no Mexican taxes due. Next question?


There would be no taxes due for the house in Mexico (or appreciation in value)??


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## Howler (Apr 22, 2013)

mickisue1 said:


> ...And, Howler, you realize that there is a fairly generous amount of foreign income that's exempted before taxes need to be paid?


In my reading I saw that up to US$92,000 could be exempted... does that mean that if my US income is less than that, then I won't need to file or pay US federal taxes either?


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## Isla Verde (Oct 19, 2011)

Howler said:


> In my reading I saw that up to US$92,000 could be exempted... does that mean that if my US income is less than that, then I won't need to file or pay US federal taxes either?


I'm not sure, but I think that $92,000US refers to money earned overseas.


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## mickisue1 (Mar 10, 2012)

Isla Verde said:


> I'm not sure, but I think that $92,000US refers to money earned overseas.


YES.

Money that was earned in the US is taxed by the US. And pensions, SS, VA, etc, are all monies that were earned in the US.


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## Howler (Apr 22, 2013)

mickisue1 said:


> YES.
> 
> Money that was earned in the US is taxed by the US. And pensions, SS, VA, etc, are all monies that were earned in the US.


Got it!! Thanks Isa Verde & Mickisue1 for those last answers - and to everyone else that chipped in on the discussion!!

:clap2:


Dan


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## TundraGreen (Jul 15, 2010)

Isla Verde said:


> I'm not sure, but I think that $92,000US refers to money earned overseas.


That is correct. If you are living outside of the US and meet some tests about time out of the country, you can exclude income from foreign, non-US sources. The current exclusion amount is $95,100 for 2012. It goes up every year.


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## gudgrief (Jun 20, 2011)

sparks said:


> >>>> You can NOT have a US residence, and then the only taxes are federal.
> 
> No income tax in Washington and many other states. I only pay Federal


You can have either a US or Mexican address for the IRS and Social Security. I suspect that's also true of the VA since many veterans live overseas.

I don't own real estate in Mexico so I can't say for sure. Real estate in Mexico would be subject to *predial* and I suspect you'd have to pay it through the *fidecomiso* that actually holds title to the property. *predial* is the term fro property tax.


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## PVMikey (Apr 18, 2012)

*Depends upon your Personal Situation*

As others have said, it depends upon your unique personal situation. If you plan to own a house or a condo in Mexico, you will definitely pay Mexican property taxes upon that real estate. On retirement income generated in the USA, you will pay US income taxes but not Mexican income tax. In Mexico, you will only pay income tax upon any income generated in Mexico. Mexico has a treaty with the USA (as do many countries) so that you will pay Mexican income tax upon any Mexico-generated income (but not US taxes); and, you will pay US income tax upon any US-generated income (but not Mexican taxes). We are retirees living in Mexico. Our retirement income is generated in the USA. We also own rental property in California, have savings, bank and brokerage accounts there, California drivers' licenses, etc. We are therefore considered by the state of California to be "constructively domiciled", even though we do not live there. Therefore, we pay US Federal and California State income taxes, and property taxes upon our rental property; however, we do not pay Mexican income tax, as our income is solely generated within the USA.


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## TundraGreen (Jul 15, 2010)

PVMikey said:


> As others have said, it depends upon your unique personal situation. If you plan to own a house or a condo in Mexico, you will definitely pay Mexican property taxes upon that real estate. On retirement income generated in the USA, you will pay US income taxes but not Mexican income tax. In Mexico, you will only pay income tax upon any income generated in Mexico. Mexico has a treaty with the USA (as do many countries) so that you will pay Mexican income tax upon any Mexico-generated income (but not US taxes); and, you will pay US income tax upon any US-generated income (but not Mexican taxes). We are retirees living in Mexico. Our retirement income is generated in the USA. We also own rental property in California, have savings, bank and brokerage accounts there, California drivers' licenses, etc. We are therefore considered by the state of California to be "constructively domiciled", even though we do not live there. Therefore, we pay US Federal and California State income taxes, and property taxes upon our rental property; however, we do not pay Mexican income tax, as our income is solely generated within the USA.


I am neither an accountant in the US, nor a contador, accountant in Mexico. The following is my best understanding of the laws.

While the post quoted above may accurately describe what happens, it is quite inaccurate about the tax laws. Both Mexico and the US tax world-wide income of residents and citizens. If you are a US citizen, all of your income, regardless of the country or origin, is subject to income tax. If you are "tax resident"* in Mexico, Mexico taxes all of your world-wide income regardless of country of origin.

However, Mexico, the US, and Canada have signed treaties that minimize double taxation by providing credits for taxes paid elsewhere. And as mentioned in an earlier post, the US provides an exclusion for $95,100 of foreign earned income for those who live outside the US. So you may not owe any taxes to the US on Mexico earned income, nor to Mexico on US income, but both are potentially taxable.

A pretty good discussion in English of the laws vis-a-vis US and Mexican taxes can be found at Income & Property Taxes in Mexico.

*Tax resident in Mexico - If you live full time in Mexico you are Tax Resident. If you have homes in two countries, and most of your income comes from outside of Mexico, you probably are not a Tax Resident.


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