Plenty is written about buying property in Mexico, and almost nothing about selling. Yet it is only when you sell that you find out whether the apartment in Playa del Carmen or the house in San Miguel de Allende was a good deal. Mexico's income tax law (the Ley del Impuesto sobre la Renta, LISR for short) puts the same sale into one of two completely different worlds: in one, you pay nothing at all on the home you live in, up to a high limit; in the other, you pay 25% of the entire sale price, without a single deduction.
Which world you land in depends on one question: are you tax resident in Mexico or not? How tax residence in Mexico is determined is explained in our article on residence permits and tax residence in Mexico. What matters here is what the answer means when you sell.
The two worlds in the law
The LISR has one title for individuals and one for non-residents. Article 90 makes clear who falls under Title IV: individuals resident in Mexico, plus non-residents only with the income of a permanent establishment. Everything in Title IV, including the exemption for your own home and the deductions for costs, therefore applies to residents.
If you are not resident, a property sale falls under Article 160 in Title V. Income from selling a property counts as Mexican if the property is in Mexico. Full stop. And Article 160 contains no exemption for the home you live in.
World one: you are resident in Mexico
The exemption for your own home
The most important number for residents is in Article 93, section XIX a). The sale of your casa habitación, your home, is tax-free if the price does not exceed 700,000 UDIS and the sale is executed before a notary (fedatario público).
The UDI is an inflation-indexed unit of account that the Banco de México publishes daily. In September 2026 it stood at just over 8.8 pesos, according to the central bank's table. The limit therefore equals around 6.2 million pesos. Because the UDI rises with inflation, the limit in pesos grows by itself.
The exemption has two conditions that matter more in practice than the number:
If the price exceeds the limit, only the excess is taxable. The law then apportions gain and deductions: the deductions count in the proportion that the excess bears to the total price. The notary calculates the advance payment on that portion and pays it over.
By its wording, the exemption applies to the seller's casa habitación, meaning the house you live in. A rented apartment or an undeveloped plot is not that, and with a holiday apartment you use only a few weeks a year you should not count on it. Ask the notary what evidence he needs that you live there before the appointment, not at the signing table.
When the gain is taxable
For everything that is not exempt, the law works with the gain, not the price. Article 121 lists what you may deduct:
The devil is in Article 124. The acquisition cost is split into land and building. If they cannot be separated, 20% counts as land. The building share is reduced by 3% a year, but never below 20% of the original cost. Only then is everything indexed for inflation. So if you hold your house for a long time, part of your acquisition cost shrinks, and the gain becomes larger than the simple difference between purchase and sale price would suggest.
Article 120 calculates the tax itself with a smoothing mechanism: the gain is divided by the number of years between purchase and sale, at most 20. Only this annual share is added to your other income for the year and runs through the progressive scale. The rest is taxed at an average rate, which you derive either from the year of sale or from the last five years. That way the law prevents a gain built up over years from landing entirely in the top bracket.
Who pays, and when
You do not have to transfer anything yourself; the notary does it. Under Article 126, every property sale triggers an advance payment, which the notary calculates and pays over within 15 days of signing the deed. In addition, Article 127 requires a payment of 5% of the gain to the state where the property is located. This 5% is not an extra tax; it is credited against the advance payment. Finally, the sale goes on your annual return, where the advance payments are credited. Losses from a property sale can be claimed under Articles 121 and 122 in the same year and the three following years.
World two: you are not resident in Mexico
This is the world of many foreigners who bought a holiday apartment in Mexico and kept living in their home country. Here Article 160 applies, and it is harsh.
The basic rule: 25% of the price
The tax is 25% of the gross proceeds, without any deduction. No acquisition cost, no notary fees, no commission. If you sell an apartment for 5 million pesos that you bought for 4.5 million, under the basic rule you pay 1.25 million pesos in tax on a gain of 500,000 pesos.
If the buyer is resident in Mexico or has a permanent establishment there, he withholds the tax. Otherwise you must declare and pay it yourself within 15 days of receiving the money.
The option: tax on the gain
There is a way out, and you should know about it before you sign the sale contract. If the sale is executed in a notarial deed, you can pay tax on the gain instead of 25% of the price, at the top rate of the income tax scale under Article 152. The gain is calculated under the same rules as for residents, with deductions and inflation adjustment. With a notarial deed you need no representative in Mexico for this. The notary calculates the tax, writes it into the deed and pays it over within 15 days.
The basic rule is only cheaper if the gain makes up a very large share of the price. Work through both options with the notary before you commit.
The valuation trap
If you deliberately set the price low to save tax, it can backfire. If the authorities find through a valuation that the value exceeds the agreed price by more than 10%, the entire difference counts as income of the buyer, if the buyer is resident abroad, and is taxed at 25%. Underpricing is therefore not a gift to the buyer but a tax risk for everyone involved.
The special case: the fideicomiso
In the restricted zone, near the coasts and borders, foreigners buy through a bank trust, the fideicomiso. How that works on purchase is explained in our article on the fideicomiso in the restricted zone. When you sell, the property does not formally belong to you; you hold rights as beneficiary.
For tax purposes, this changes nothing about the outcome. Under Article 14 of the Federal Tax Code (Código Fiscal de la Federación), it is a disposal when the beneficiary assigns his rights or instructs the trustee to transfer ownership to a third party. So for tax purposes you sell exactly as if you were on the land register, and the same two worlds apply.
What about VAT?
One less thing to worry about: under Article 9 of the VAT law, no VAT is due on the sale of land, nor on the sale of buildings used as a home. If only part is used as a home, only that part is exempt, and hotels are expressly excluded. So if you sell a mixed-use property with a shop on the ground floor, the commercial part of the building must be looked at separately.
And at home?
Mexico taxes the sale because the property is located there. Whether your home country may also tax it, and how any double taxation is relieved, depends on your country's own rules and on its tax treaty with Mexico, if it has one:
Have the tax consequences at home checked before the sale, not with your next tax return.
The traps at a glance
Trap 1: your status is wrong. If you believe you are resident but are not for tax purposes, you plan around the exemption and end up paying 25% of the price. Clarify your status in writing before the notary appointment.
Trap 2: the holiday apartment as a home. The exemption applies to the casa habitación. Do not count on it for an apartment you use a few weeks a year.
Trap 3: two sales too close together. Within three years you get the exemption only once, and the notary checks five years back.
Trap 4: missing receipts. Acquisition costs, building investments, notary invoices and commissions count only with proof. If you did not keep proper paperwork when you bought, you give away deductions when you sell. What to watch for when you buy is in our guide to buying property in Mexico.
Trap 5: overlooking the option. As a non-resident, paying 25% of the price when the notarial deed allows tax on the gain is the most expensive mistake on this list.
Trap 6: underpricing in the contract. A valuation more than 10% higher makes the difference taxable.
If after the sale you want to leave not just the property but Mexico behind, or you are only just weighing up whether the country works as a home, you will find the pros and cons in our article on moving to Mexico. The key facts on tax, treaties and passport are on the Mexico country page.
Carpe Diem. Life is short and fleeting. One shot. Make it count.