Property Taxes in Mexico for Foreign Owners: The 2026 Guide

Mexican property taxes are low. Annual property tax (predial) runs 0.05% to 0.3% of cadastral value, transfer tax (ISAI) runs 2% to 5%, and rental income tax (ISR) on non-resident landlords runs 25% withholding on gross rent or 35% on net rental income with a fiscal representative. Capital gains tax on sale is where the biggest variance hits, and where most foreign sellers overpay because they failed to plan correctly.

Foreign owners do not pay higher property taxes than Mexican citizens. The same rates apply regardless of nationality. What differs is the rental and capital gains treatment, which depends on tax residency status and whether you have a Mexican fiscal representative or RFC (Registro Federal de Contribuyentes) tax ID.

Predial: the annual property tax

Predial is a municipal tax based on the cadastral value (valor catastral) of the property as recorded with the local catastro office. Cadastral value sits well below market value in almost every Mexican municipality, often 40% to 70% of true market value, which is one reason predial bills stay so low.

Rates by major foreign buyer destination in 2026:

Quintana Roo (Cancún, Playa del Carmen, Tulum, Cozumel): 0.15% to 0.25% of cadastral value. A property with cadastral value of MXN 3 million pays MXN 4,500 to 7,500 per year ($250 to $420). Los Cabos (Cabo San Lucas, San José del Cabo): 0.1% to 0.2%. Mexico City: 0.05% to 0.36% (progressive). Puerto Vallarta and Riviera Nayarit: 0.16% to 0.22%. San Miguel de Allende: 0.1% to 0.16%.

Predial is billed annually and is typically due by January or February. Most municipalities offer a 10% to 20% discount for paying the full year in January, dropping to 5% to 10% in February, no discount after March. Pay online through the municipal website in most cities. Late payments accrue interest and can complicate any future sale.

Property owned through a fideicomiso pays predial in the same amount as directly owned property. The bank does not handle predial payments. The beneficiary (you) is responsible.

ISAI: acquisition tax at purchase

ISAI (Impuesto Sobre Adquisición de Inmuebles), sometimes called impuesto de traslado de dominio, is a state or municipal tax on the transfer of real estate. It applies once at purchase. Rates vary by state:

Quintana Roo: 2% of the transfer value. Baja California Sur (Los Cabos, La Paz): 3%. Jalisco (Puerto Vallarta, Guadalajara): 2.5% to 3%. Nayarit (Punta Mita, Sayulita): 2%. Mexico City: 4% to 5% (progressive). State of Mexico: 4% to 5%. Yucatán (Mérida, Progreso): 2%. Guanajuato (San Miguel de Allende, Querétaro adjacent): 2% to 3%.

ISAI is calculated on the higher of the declared sale price, the cadastral value, or a third-party appraisal commissioned by the notary. Notaries are legally required to use the highest figure, which prevents under-declaration but also means buyers cannot reduce ISAI by reporting a low price.

Total closing costs in Mexico typically run 5% to 10% of the purchase price, depending on location and whether a fideicomiso is required. The fideicomiso adds $1,500 to $3,500 in setup costs and an SRE permit fee of roughly $1,500. Notary fees are 1.5% to 2% of the transaction value. Registration fees are typically 0.5% to 1%.

ISR on rental income for non-residents

This is where foreign owners need to plan carefully. Mexico taxes rental income generated by Mexican property regardless of where the landlord lives. Two tax regimes apply to non-residents:

The simplified regime applies a 25% withholding on gross rental income, with no deductions allowed. The platform or agent paying the rent withholds and remits the tax. This regime is simple but expensive because no expenses come out of the calculation.

The full regime requires the foreign owner to obtain an RFC tax ID and appoint a Mexican fiscal representative. The owner files monthly returns, can deduct property tax, condominium fees, depreciation, repairs, financing costs, and management fees, and pays 35% on net income. For most rental properties the full regime produces a lower effective tax rate, often 10% to 18% of gross rent, but requires ongoing accounting.

Airbnb, Vrbo, and Booking.com automatically withhold ISR and IVA (16% VAT) on rentals booked through their platforms in Mexico under the 2020 digital-platforms tax law. The withholding rates depend on whether the host has an RFC: 4% ISR plus 8% IVA if registered, 20% ISR plus 16% IVA if not. The platform remits these taxes directly to SAT (Servicio de Administración Tributaria). Hosts can credit the platform withholding against their final tax liability.

Mexico has tax treaties with the United States, Canada, the United Kingdom, Germany, France, and many other countries. The US-Mexico treaty allows US owners to claim a foreign tax credit on US Form 1116 for Mexican tax paid on rental income, generally avoiding double taxation. Canadian owners benefit from a similar provision under the Canada-Mexico treaty.

ISR on capital gains at sale

Capital gains tax is the largest tax exposure most foreign owners face. Three regimes exist:

The non-resident regime applies a 25% withholding on the gross sale price, with no deductions for cost basis or improvements. The notary withholds and remits at closing. This is the default for foreign sellers without an RFC and a fiscal representative.

The non-resident-with-representative regime allows the seller to compute gain on net basis (sale price minus inflation-adjusted cost basis, minus documented improvements, minus selling costs) and pay 35% on net gain. For a property that has appreciated modestly, this produces a much lower effective rate than the 25% gross regime. For a property that has appreciated heavily, the gross regime may be cheaper.

The resident regime requires Mexican tax residency and provides a one-time primary residence exemption of up to 700,000 UDI (approximately MXN 5.6 million or $310,000 in 2026 values). To qualify, the property must have been the seller's primary residence and the seller must have lived in it for at least three years, with utility bills and a CFE electricity account in their name. The exemption can only be used once every three years. Most foreign sellers do not qualify because they lack tax residency status.

Mexican tax residency is established by spending more than 183 days in Mexico in a calendar year, or by having a permanent home in Mexico that is the center of economic interests. Foreign owners who relocate to Mexico and intend to sell within five years often benefit from establishing tax residency well in advance of the sale.

Improvements increase cost basis if documented properly. Factura tax receipts (CFDI 4.0 with the property as the recipient) are required. Cash payments without facturas do not increase basis. This is a major issue: many foreign owners renovate properties without facturas and lose six-figure basis adjustments on sale.

Other taxes and fees

ISR on appreciated property gifted between non-spouses is treated as a sale and triggers capital gains tax at the same rates as a sale. Gifts between spouses, parents, and children are typically exempt under federal income tax law but may trigger state-level transfer taxes.

Inheritance is not federally taxed in Mexico. Beneficiaries inherit the property's cost basis at fair market value at the date of death, which steps up basis and effectively erases prior appreciation. Heirs pay ISAI on the inheritance transfer at standard state rates and notary fees.

IVA (16% VAT) does not apply to residential property purchases between individuals. It does apply to commercial property, new construction sold by a developer, and short-term rentals. New-build buyers should verify whether the developer's quoted price includes IVA.

The 2% Special Tax on Lodging Services (Impuesto sobre Hospedaje) applies to short-term rentals in most states, with rates varying from 2% to 5%. Platforms like Airbnb withhold and remit this in major destinations.

Practical compliance steps

Obtain an RFC tax ID early in the ownership cycle if you plan to rent, sell, or hold the property long-term. The RFC enables fiscal representation, lowers rental withholding, and is required to access the full sale regime. Setup involves a Mexican consular CURP, notarized power of attorney, and registration with SAT either in person or remotely through an authorized representative.

Keep facturas for every renovation expense, capital improvement, notary fee, and selling cost. Mexico's cost basis rules require CFDI 4.0 electronic invoices with your RFC as the recipient. Without them, your basis is the original purchase price only.

File annual returns even when withholding has already been paid. The return reconciles withholding against actual liability and is the only way to claim a refund of overpaid tax. Filing is also a prerequisite for using the full sale regime on disposition.

Verifying property history before purchase prevents tax surprises later. A platform like Bektu (https://bektu.com) tracks Mexican developer delivery history and project records, which matters because buying from a developer with poor factura discipline often means inherited basis problems on resale.