Yes, Mexico does have an income tax. It is levied only at the federal level, so the same rules apply nationwide, with no separate state or municipal income tax layered on top. Individuals pay on a progressive scale that runs from 1.92% to 35%, corporations pay a flat 30%, and how much you owe depends on whether you count as a Mexican tax resident, what kind of income you earn, and how much of it there is.
Who Actually Owes Mexican Income Tax
The first question is residency, because it decides whether Mexico taxes your worldwide income or only what you earn inside the country.
You are a Mexican tax resident if you spend more than 183 days in Mexico during a calendar year. The days do not have to be consecutive; the SAT (Servicio de Administración Tributaria, Mexico’s federal tax authority) counts your total presence across the twelve months. You can also be treated as a resident without hitting 183 days if your “center of vital interests” is in Mexico, meaning your main home is there or more than half your income comes from Mexican sources.
Residents are taxed on income from anywhere in the world. Non-residents are taxed only on income sourced inside Mexico. If you plan to end your residency by leaving the country, you have to file a notice of suspension of activities with the SAT at least 15 days before the change. Skip that step and you remain a Mexican tax resident on paper, no matter where you actually live.
What Counts as Taxable Income
Mexico’s income tax law reaches most of the categories you would expect:
- Wages, salaries, and bonuses from employment
- Self-employment and business or professional fees
- Rental income from Mexican real estate
- Capital gains from selling property, stocks, or other assets
- Dividends from Mexican or foreign companies
- Interest from bank accounts, bonds, and similar instruments
Residents report all of it, regardless of where it was earned. Non-residents only report the pieces sourced in Mexico.
Individual Income Tax Rates for 2026
Mexico uses a progressive bracket system under the Ley del Impuesto sobre la Renta.1diputados.gob.mx. Ley del Impuesto sobre la Renta Each peso of income above a bracket floor is taxed at that bracket’s rate, not the whole amount. The 2026 annual brackets for residents:
- Up to MXN 10,135: 1.92%
- MXN 10,136 – 86,022: 6.40%
- MXN 86,023 – 151,176: 10.88%
- MXN 151,177 – 175,735: 16.00%
- MXN 175,736 – 210,403: 17.92%
- MXN 210,404 – 424,353: 21.36%
- MXN 424,354 – 668,840: 23.52%
- MXN 668,841 – 1,276,925: 30.00%
- MXN 1,276,926 – 1,702,567: 32.00%
- MXN 1,702,568 – 5,107,703: 34.00%
- Over MXN 5,107,703: 35.00%
Each bracket also carries a fixed base tax amount plus the percentage on income above the floor. The SAT publishes the exact tables annually. Someone earning MXN 500,000 a year pays the lower rates on the earlier portions of that income and 23.52% only on the slice inside the top bracket they reach.
The Simplified Regime for Small Earners: RESICO
Individuals with revenue up to MXN 3.5 million per year can opt into the Régimen Simplificado de Confianza (RESICO) instead of the standard brackets. RESICO applies to business income, professional services, leasing, and agricultural or primary activities. Rates run from 1% to 2.5% of collected income, and tax is calculated on cash flow, so you pay only on money actually received rather than on amounts invoiced.1diputados.gob.mx. Ley del Impuesto sobre la Renta Corporations with annual revenue under MXN 35 million are generally required to use RESICO.
Corporate Income Tax
Mexican companies, and Mexican permanent establishments of foreign companies, pay a flat 30% on taxable profits with no progressive brackets.1diputados.gob.mx. Ley del Impuesto sobre la Renta The rate is the same whether the company clears a small profit or a large one. Employers also carry mandatory social security contributions to IMSS (funding retirement, health care, and housing), which can run roughly 24% to 38% of payroll depending on industry risk classification and employee benefits. Total employment cost sits well above stated salary.
How Non-Residents Are Taxed
If you live outside Mexico but earn Mexican-source income, only that Mexican-source income is taxed. Wage income runs through a tiered withholding schedule rather than the resident brackets:
- Up to MXN 125,900: exempt
- MXN 125,901 to MXN 1,000,000: 15%
- Over MXN 1,000,000: 30%
These thresholds apply to income accumulated over a twelve-month period.2Servicio de Administración Tributaria. Cases in Which the Income Tax Must Be Paid The Mexican payer withholds the tax before releasing funds. Rental income from Mexican property is withheld separately at a flat 25%. Because non-residents generally do not file an annual return the way residents do, the withheld amount is often the final tax.
Filing, Deadlines, and Penalties
Resident individuals file annually through the SAT online portal, using an RFC (tax ID) and an e.firma (digital signature). The deadline is April 30 of the year following the tax year. Some taxpayers do not need to file at all: those whose only income is salary under MXN 400,000, or only bank interest under MXN 100,000, may be exempt.
Miss the deadline or underpay, and the SAT applies monthly surcharges. For 2026 the surcharge is 2.07% per month, up from 1.47% the year before, and it compounds. Beyond surcharges, the SAT can fine you for failing to file, filing with errors, or failing to issue proper CFDIs (Mexico’s digital tax receipts), and repeated non-compliance can lead to your digital tax certificate being restricted, which blocks you from issuing invoices. Fraud and evasion carry criminal penalties.
If You Are a US Citizen Living or Earning in Mexico
The United States and Mexico have an income tax treaty that prevents the same income from being taxed twice. If you pay Mexican income tax on earnings, you can generally claim a foreign tax credit on your US return by filing IRS Form 1116, which reduces your US tax on that same income dollar for dollar. Only income taxes paid to Mexico qualify; Mexico’s value-added tax (IVA) does not. If the treaty entitles you to a reduced Mexican rate on a particular type of income, only the treaty-reduced amount qualifies for the US credit, and you would have to apply to Mexico for a refund of any excess.3Internal Revenue Service. Foreign Tax Credit
If you exclude foreign earned income under Form 2555, you cannot also claim the foreign tax credit on the excluded portion. Which approach produces a better result depends on your income level and effective rates in both countries. The treaty also contains a saving clause preserving the US right to tax its own citizens on worldwide income, so US citizens in Mexico still have to file US returns.4Internal Revenue Service. United States Income Tax Treaties – A to Z