# Taxes on home/property sale



## circle110 (Jul 20, 2009)

I have not sold a home in Mexico before so I don't know how it works. Maybe someone who has done so could clue me in a bit.

My understanding was that if a foreigner held a property for 3 years or more the "****** sale tax" was no longer imposed. However, I was told by someone yesterday that there is a 15% tax, 20% for foreigners, on the sale of a house. I asked him if that was 20% of the capital gain or 20% of the sale price and he said he wasn't sure.

What is the actual tax rate on the sale of a home owned for more than 3 years on a foreigner? Anyone have experience with this?

Thanks!


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## makaloco (Mar 26, 2009)

I don't have any personal experience selling a home, but here's an article from a couple of years ago that may be helpful:
Mexico Cracking Down on Capital Gains Tax


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## conklinwh (Dec 19, 2009)

I don't have personal knowledge but have a lot of realtor friends. Understand that although the new law was to lower timeframe from 5 to 4 years for capital gains that it still is not in place so at 3 years you will get hit with full capital gains. What I can't get a good story on, since I built, is what form building expenses need to be to establish a cost base on top of the land.


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## tommygn (Dec 2, 2011)

Both are incorrect. Taxes are paid in any case only on the capital gain. It is 30% of the capital gain. Nevertheles, if you have owned that home more than 5 years you dont pay any taxes at all.


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## circle110 (Jul 20, 2009)

Thanks all. I have learned a couple things since my original post. One, the exact amount of the tax differs by state and is decided upon by the notario doing the sale transaction. Most estimates are between 25-30% of capital gains. Two, the home must be your _principal_ residence; a rental home, vacation home or undeveloped property doesn't count and you'll get hit with the full CG tax.

I am seeing my notario this week to have him explain to me precisely how it would work for my situation and I will post what he says after the meeting.


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## Elephant1962 (May 20, 2012)

*realtor*



circle110 said:


> Thanks all. I have learned a couple things since my original post. One, the exact amount of the tax differs by state and is decided upon by the notario doing the sale transaction. Most estimates are between 25-30% of capital gains. Two, the home must be your _principal_ residence; a rental home, vacation home or undeveloped property doesn't count and you'll get hit with the full CG tax.
> 
> I am seeing my notario this week to have him explain to me precisely how it would work for my situation and I will post what he says after the meeting.


Thanks for that useful information. Let me ask you how one goes around purchasing a home in Mexico. What I want to know is whether the process is similar to in the US. I see realtor sites on the Internet in English and frankly wonder whether that is the best route to go. Do you think that prices are different for real estate targetted toward foreigners?


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## circle110 (Jul 20, 2009)

>>What I want to know is whether the process is similar to in the US.
Only a little. The sale/transaction process is handled by a notario (a sort of super-lawyer), as a foreigner you must purchase a permit from the government to buy real estate and real estate agents are generally unnecessary. Also, if you are buying on the oceanfront or the border you need to use a bank trust to purchase; you can't technically own own properties in those areas outright although the end result is pretty much like ownership.

>>I see realtor sites on the Internet in English and frankly wonder whether that is the best route to go.
Usually not. You are almost guaranteed to pay more... much more. Sites like vivastreet.com.mx and trovit.com.mx have a mix of houses for sale by real estate agents and individuals and aren't necessarily aimed at the foreign market. You can also do a google search for your location and "inmobiliaria" to get a list of web sites of agencies in that area. Some of them will be all-purpose agencies and others might be targeted at the foreign market. The local papers also will have listings by both agents and individuals. 

After searching for a while you will begin to see how the pricing structure lays out in that area and the overpriced properties will be more noticeable. The big problem here is that if you don't know the area very well the listings won't mean much since, just like in the US, it's location, location, location. I can't tell you how many houses we have looked at that appeared great from the ad and the online photos but when we see them in person we say "no way" because the area is bad -- either it's nasty or, more frequently, it's simply inconveniently located with poor access. And this is in a city that we've lived in for almost 3 years.

>>Do you think that prices are different for real estate targetted toward foreigners? 
Pretty much guaranteed. Your least expensive route is to buy direct from the owner (no commission for them to pay so they'll negotiate lower), next would be from a local agency (they charge a modest commission to the seller) and the most expensive would be to buy from an agency geared towards foreigners.

Remember that "real estate agents" in Mexico require no certification or licensing. Anyone can call themselves an agent and try to act as a middle man to extract a cut of the sale or try to gouge a foreigner who doesn't know the local market.


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## Elephant1962 (May 20, 2012)

*Thanks*

Hi Circle,

I appreciate your thoughtful response; it will be a great help. I have more research to do, but now I have some direction.

Best wishes


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