Property tax in Mexico is called the predial, and it is collected each year by the municipality where the property sits. Rates run from about 0.05% to 1.2% of the property’s officially assessed value, and the assessed value is almost always well below market price. That combination keeps annual bills modest, often between 0.1% and 0.5% of assessed value in practice. Beyond the predial, buying, selling, or renting property in Mexico brings its own separate taxes, and foreign buyers near the coast or a border face an extra ownership structure to be aware of.
How the Annual Predial Is Calculated
Every property has a valor catastral, a cadastral value assigned by the municipality. This is the government’s official appraisal and the base your predial is calculated from. Municipalities set it using location, lot size, land characteristics, and the age and condition of any structures.
Each municipality then applies its own formula, written into its local fiscal code (Código Fiscal Municipal), to convert that cadastral value into a bill. Some use a flat percentage. Others use tiered brackets, with higher-value properties paying a slightly higher rate. Rates generally fall between 0.05% and 1.2%, and most homeowners land somewhere in the 0.1% to 0.5% range. A property with a cadastral value of 2 million pesos might therefore owe somewhere between 2,000 and 10,000 pesos a year, depending on where it sits.
When Predial Is Due and How Discounts Work
Municipalities issue assessments at the start of the calendar year, and payment windows open in January. Paying early is where real money is saved. Most jurisdictions offer a discount for settling the full year in January or February, and those reductions can range from 5% to 20%. January generally carries the steepest discount; February a smaller one.
Miss the early window and you simply pay the standard amount. Let the bill lapse past the first quarter, though, and municipalities begin adding monthly surcharges plus inflationary adjustments. Over several years, penalties compound quickly. Unpaid predial also creates a lien on the property that shows up the moment you try to sell. A buyer’s notario will flag any outstanding balance, and the sale cannot close until the debt is cleared.
How to Pay Your Predial
Start by locating your Clave Catastral, the unique property identification number the municipality has assigned. You can find it on a previous tax receipt or on your deed. This code is the key to your account in every payment system, and entering it wrong can credit your money to someone else’s property.
With the Clave Catastral, you can pick up the official payment form (boleta predial) at the municipal hall (Palacio Municipal) or download it from the municipality’s website. The form shows the assessed value, the amount owed, and any discount you qualify for. Some municipalities want you to confirm that the registered square footage still matches the property before they process payment.
Most municipalities offer several ways to pay:
- In person at the treasury office (Tesorería), where staff process the payment and stamp your receipt on the spot.
- At the teller window of many commercial banks.
- At convenience store chains such as OXXO, in jurisdictions that support it.
- Through the municipality’s online payment gateway, by card.
Whichever channel you use, keep the receipt (comprobante de pago). Make sure the cashier stamps it in person, or save the PDF if you pay online. When you eventually sell, the notario will ask for proof that every year of predial has been paid. Without a clean record, the public registry will not issue the Certificado de Libertad de Gravamen (certificate of no liens), and the sale cannot close.
Acquisition Tax When You Buy
Buying real estate in Mexico triggers a one-time transfer tax, the Impuesto Sobre Adquisición de Inmuebles (ISAI). Some states call it the Impuesto sobre Traslado de Dominio, but the function is the same: it is the government’s charge for recognizing the change of ownership. The buyer pays it, and it must be settled before the public registry will record the new deed.
Rates are set in each state’s revenue law (Ley de Hacienda) and usually fall between 2% and 4.5% of the transaction value. The tax applies to whichever is higher: the sale price stated in the deed or the appraised value. On a 5-million-peso purchase in a state with a 3% rate, the buyer owes 150,000 pesos before the deed can be recorded.
The person actually calculating this tax, collecting it, and sending it to the government is the notario público, a government-appointed attorney who must handle every property transfer in Mexico. Without a notario, a sale has no legal effect. Their professional fees, typically 1% to 3% of the sale price, sit on top of the tax itself.
Capital Gains Tax When You Sell
Selling generates income subject to Mexico’s Impuesto Sobre la Renta (ISR). What you pay depends on whether you are a Mexican tax resident.
If You’re a Foreign (Non-Resident) Seller
The default is 25% applied to the total sale price, with no deductions. If the sale goes through a notario público and you have a legal representative in Mexico, you can instead elect to pay 35% on the net profit. Net profit is the sale price minus the inflation-adjusted purchase price, improvements, notary fees, appraisal costs, and sales commissions.1Servicio de Administración Tributaria. Fiscal Obligations for Foreigners
The 35%-on-profit option almost always produces a lower bill than 25% on gross proceeds, which is why lining up a notario and a tax representative before listing is worth the cost.
If You’re a Mexican Tax Resident
Residents pay at progressive income tax rates, which can reach up to 35%. Residents selling a primary home can claim an exemption on gains up to roughly $244,560 USD in gross proceeds, provided they haven’t used the same exemption in the prior three years. Residents also have broader rights to deduct improvements, commissions, and closing costs.
Rental Income Tax
If you rent your property, the income is taxable in Mexico no matter where you live.
Non-residents pay a flat 25% withholding on gross rental income, with no deductions for maintenance, insurance, or management fees.1Servicio de Administración Tributaria. Fiscal Obligations for Foreigners
Mexican tax residents report rental income on their annual return at ordinary progressive rates. Residents can deduct actual expenses, including repairs, insurance premiums, property tax, mortgage interest, and depreciation. As an alternative, residents can take a flat 35% standard deduction from gross rental income plus the amount paid in predial. The standard deduction is simpler, but owners with heavy maintenance costs or mortgage interest often come out ahead itemizing.
Foreign Buyers Near the Coast or Border
Article 27 of the Mexican Constitution prohibits foreigners from directly owning land within 50 kilometers of the coastline or 100 kilometers of any international border. This zona restringida (restricted zone) covers nearly every popular beach destination and border city, including Cancún, Puerto Vallarta, and Los Cabos.2Consulado de México en el Reino Unido. Acquisition of Properties in Mexico
The workaround is a fideicomiso, a bank trust in which a Mexican bank holds legal title on your behalf while you remain the beneficiary with full rights to use, rent, remodel, sell, or pass the property to heirs. The trust runs for 50 years and can be renewed. Setting one up costs roughly $700 to $1,200 USD, and annual bank maintenance fees run $500 to $1,000 USD. That annual fee is a permanent ownership cost first-time buyers often forget to budget for.2Consulado de México en el Reino Unido. Acquisition of Properties in Mexico
Outside the restricted zone, no trust is required. Foreigners can hold title directly in cities such as Mexico City, Guadalajara, San Miguel de Allende, and Mérida.
What About IVA?
Mexico’s value added tax (IVA) is 16%, but residential real estate is largely outside it. Sales of land, residential construction, and residential rentals are all IVA-exempt. The 16% rate applies to commercial property sales and new commercial construction, so a typical home purchase will not have IVA added to the price.