Taxes in Mexico for Expats 2026: The 183-Day Rule Is a Myth
MEXICO · EXPAT GUIDE
Key Facts
- —What makes you resident Establishing a home in Mexico. Not a day count, and not the colour of your residence card.
- —The income tax Eleven brackets from 1.92% to 35%. The top rate starts near US$298,000 of annual income.
- —The simplified regime RESICO taxes gross turnover at 1% to 2.5%, up to about US$204,000 a year.
- —Sales tax Sixteen percent nationally. An eight percent border rate survives into 2026 but does not reach the Riviera Maya.
- —Selling your home About US$360,000 of gain is exempt per qualifying owner, once every three years.
- —The catch There is no US social security agreement, so self-employed Americans can pay into both systems.
The most repeated fact about Mexican tax residency is not in the law. What the law actually says is simpler, and catches more people.
Search for tax residency in Mexico and you will be told about a 183-day rule. It is not in the law.
Article 9 of the federal tax code says something different and much shorter. You are resident if you have established your home here.
That is the whole individual test. The day count that everyone quotes applies to foreign construction companies, not to people.
So What Does Make You Resident
If you keep a home in Mexico and nowhere else, you are resident. Nothing else is examined.
If you keep homes in two countries, the tie-breaker is your centre of vital interests. Mexico wins if more than half your income is Mexican-sourced.
It also wins if Mexico is the main centre of your professional activities. Either limb is enough.
Holding a temporary or permanent resident card does not by itself make you a tax resident. Establishing a home does.
This cuts both ways. Foreigners who assume they are safe because they stayed under six months are often wrong.
The 2026 Income Tax Table
Mexico has eleven brackets for residents, published in the official gazette in December 2025. They were uprated by an inflation factor of 1.1321.
The lowest band is 1.92% on income up to 10,135 pesos, about US$592 a year. The next runs to 86,022 pesos at 6.4%.
Thirty percent starts at 668,840 pesos, roughly US$39,050. Thirty-two percent starts at 1,276,926 pesos.
The top rate of 35% begins at 5,107,704 pesos, some US$298,213. That is well above what most foreign residents declare.
Every bracket carries a fixed amount plus a percentage on the excess. The table is not a flat rate on total income.
If You Are Not Resident
Non-residents face flat rates rather than the table. Employment income is exempt to 125,900 pesos, about US$7,350, then 15%, then 30% above a million.
Rental income is taxed at 25% of gross with no deductions. That surprises owners who expected to net off costs.
Selling property as a non-resident costs 25% of the gross sale price. You can elect 35% on the net gain instead if you appoint a Mexican representative and file.
Dividends carry 10% withholding and gains on listed shares 10%. Interest runs from zero to 35% depending on the instrument.
Sales Tax and the Border Rate
The standard rate of value added tax is 16%. A reduced 8% rate survives in the northern and southern border regions through the end of 2026.
That relief is conditional on registering with the tax authority. It is a genuine stimulus, not an automatic discount.
One point worth fixing. Playa del Carmen is not in a border stimulus zone, so the rate there is 16%.
The Simplified Regime
RESICO is the simplified regime for individuals and it is genuinely light. It taxes gross turnover with no deductions at all.
Rates run from 1% on monthly income up to 25,000 pesos to 2.5% between 208,334 and 291,666 pesos. The annual ceiling is 3,500,000 pesos, about US$204,000.
Company shareholders and partners are excluded, as are people in salary-simulation arrangements. So are those operating through trusts.
Two changes landed in 2026. Late-payment surcharges rose from 1.47% to 2.07% a month, and monthly refunds became available.
Selling Your Home
The principal-residence exemption is generous and badly understood. It covers 700,000 investment units of gain per qualifying owner.
At the September 2026 unit value that is 6,172,800 pesos, roughly US$360,400. A co-titled spouse who also qualifies doubles it.
Four conditions apply. You must be resident with a tax number and it must be your primary home.
The land must be no more than three times the built area. And you can claim only once every three years.
Here is the part nobody writes down. The law does not say whether temporary or permanent status qualifies, and notaries interpret it differently.
That decision is made at the notary’s office, not by the tax authority. Ask before you sign, not after.
Property Taxes
Annual property tax, called predial, is startlingly low by American or European standards. On the Riviera Maya it runs roughly 0.1% to 0.7% of cadastral value.
On a property assessed at 2,500,000 pesos that is about 5,000 pesos a year, some US$292. Cadastral values sit well below market prices.
Playa del Carmen gives 25% off for paying the full year in the first half of January. Retirees and people with disabilities get 50% off a modest home.
One warning. The municipality proposed raising cadastral values by up to 900% in 2025.
Whether that took effect for 2026 is not clear from published sources. Ask the treasury office before you budget.
Acquisition tax in the municipality is 2% or 3% of assessed value, due within fifteen business days. Budget four to eight percent of the price for all closing costs.
For Americans Specifically
The tax treaty dates from 1992 and still governs. Its tie-breaker runs through permanent home, then centre of vital interests, then habitual abode, then nationality.
The savings clause means the United States taxes its citizens wherever they live. Most treaty benefits do not override that.
The foreign earned income exclusion for 2026 is US$132,900. The housing exclusion base is about US$21,264.
Now the part that is most often reported wrongly. There is no social security totalisation agreement between the two countries.
A self-employed American in Mexico can therefore owe contributions in both systems. That is a real cost and it is not avoidable by treaty.
What to Do With This
Work out your residency position before you move, not in your first filing season. The home test decides it and it is easy to trigger by accident.
If you will earn Mexican-sourced income, price RESICO against the ordinary table. Below the ceiling the simplified regime usually wins.
Get the notary’s view on the residence exemption in writing before you buy. It is the largest single number in this guide.
More: Expat guides, every day from The Rio Times.
Frequently Asked Questions
Is there a 183-day rule for tax residency in Mexico?
No. Article 9 of the federal tax code makes residency turn on establishing a home in Mexico. The 183-day threshold in that part of the code concerns foreign construction companies.
What are the 2026 income tax rates?
Eleven brackets from 1.92% to 35% for residents. The 30% band begins near US$39,050 of annual income and the top 35% rate near US$298,213.
Does a residence card make me a tax resident?
Not by itself. Immigration status and tax residency are separate. Establishing a home in Mexico is what triggers tax residency.
How much gain is exempt when I sell my home?
About 6,172,800 pesos, or US$360,400, per qualifying owner, claimable once every three years. A co-titled spouse who qualifies doubles it.
Do Americans pay social security twice?
They can. There is no totalisation agreement between the United States and Mexico, so self-employed Americans may owe contributions to both systems.
Sources: Article 9 of the Codigo Fiscal de la Federacion, Anexo 8 of the Resolucion Miscelanea Fiscal 2026 (DOF, 28 December 2025), PwC Worldwide Tax Summaries, the US-Mexico Income Tax Convention of 1992, IRS Revenue Procedure 2025-32, and the Ayuntamiento de Playa del Carmen.
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