Quick Answer
Capital gains tax in Mexico is calculated at up to 35% on the net gain from the sale. The net gain is the sale price minus the original purchase price (adjusted for inflation), closing costs, documented improvements, and fideicomiso fees. Deductions can significantly reduce the taxable gain. If the property was your primary residence for 3+ years, the first ~$700,000 USD equivalent is exempt.
Detailed Answer
Understanding Mexico's capital gains tax — known as ISR sobre enajenacion de inmuebles — is essential for any property owner planning an eventual sale. The tax applies to the net gain, calculated as the difference between your sale price and your adjusted cost basis. That basis includes the original purchase price indexed for inflation using Mexico's INPC index, plus documented improvements, closing costs, fideicomiso fees, and real estate commissions. Marginal rates reach 35%, but effective rates are often much lower after deductions.
The most powerful exemption is the primary residence exclusion: if you have lived in the property for at least three of the last five years and can prove it with utility bills, INE, or residency documents, the first approximately $700,000 USD equivalent of gain is tax-free. This exemption can be used once every three years. Our team navigates this for sellers every week, ensuring documentation is in order well before listing.
Proper tax planning should begin years before a sale, not at the closing table. Keeping organized receipts for every renovation directly lowers your tax bill. For personalized strategy, contact our team or explore related topics in our FAQ hub.