Property taxes in Mexico are surprisingly low compared to the US and Canada. Here is what homeowners in Merida actually pay in predial, capital gains, and transfer taxes — with real numbers.
One of the financial surprises that pleasantly shocks North American buyers in Merida is the property tax bill. Mexico’s predial — the annual property tax — is extremely low by US and Canadian standards, often one-tenth or less of what a comparable property would cost in property taxes north of the border.
Here is a complete picture of what property owners in Merida actually pay across all relevant taxes.
Predial: Annual Property Tax
The predial is Mexico’s equivalent of annual property tax. It is calculated based on the property’s valor catastral — the government’s assessed fiscal value, which in most of Merida runs significantly below the actual market value (often 20-50% of market value).
2026 predial ranges for Merida properties:
| Property | Market Value (approx) | Annual Predial (approx) |
|---|---|---|
| Small house, older zone | $50,000 USD | $800-2,500 MXN ($45-140 USD) |
| 2BR house, north | $120,000 USD | $2,000-5,000 MXN ($110-280 USD) |
| Restored colonial, Centro | $300,000 USD | $4,000-10,000 MXN ($220-555 USD) |
| Modern house with pool, premium norte | $400,000 USD | $6,000-15,000 MXN ($333-830 USD) |
Yes — annual property taxes of $100-800 USD on properties worth hundreds of thousands of dollars. This is not a typo. The low predial is one of the real financial advantages of owning real estate in Mexico.
Early payment discount: Yucatan municipalities offer a discount (typically 10-20%) for paying predial before the end of February each year. Most savvy owners pay in January or February to capture this savings.
Where to pay: At the municipal tax office (Catastro), certain banks, or online through the municipal portal. Payment generates a recibo de pago that should be kept permanently.
Consequences of non-payment: Unpaid predial accrues surcharges and interest. Significant arrears can lead to liens on the property and complicate any future sale. When buying, the notario verifies that predial is current — outstanding predial gets paid from sale proceeds at closing.
ISABI: Property Transfer Tax
When you buy property in Mexico, you pay a transfer tax at closing. In Yucatan, this is called Impuesto sobre Adquisición de Bienes Inmuebles (ISABI).
Rate: 2% of the higher of the purchase price or the fiscal value (valor catastral).
In most transactions, the purchase price exceeds the fiscal value, so the tax is calculated on the purchase price.
Example: Purchasing a house for $2,500,000 MXN (~$140,000 USD):
- ISABI = 2% × $2,500,000 = $50,000 MXN (~$2,800 USD)
This is paid by the buyer at closing through the notario, who collects it and remits it to the state.
ISABI is in addition to the notario’s fees, registration fees, and other closing costs. Total buyer closing costs typically run 4-7% of the purchase price (see our guide to the notario process for the complete breakdown).
Capital Gains Tax: What Sellers Pay
When you sell property in Mexico, any gain above your original cost basis is subject to income tax. How this works depends on whether you are a Mexican tax resident, a foreign resident, or a non-resident.
For Mexican Tax Residents (including expats with RFC who live in Mexico)
Gains from selling a primary residence (casa habitación) may be exempt from capital gains tax if:
- The property was your primary residence for at least the past two years
- You have not claimed this exemption in the previous three years
- The gain is within the exemption limit (currently approximately 700,000 UDIs, roughly $4.5-5M MXN equivalent)
Gains exceeding the exemption or from investment properties are taxed at ordinary income tax rates through your annual tax return.
For Non-Residents
Non-residents pay a withholding tax on the gain at closing, calculated one of two ways (at the taxpayer’s option, whichever is lower):
- 25% of the gross sale price (no deductions, applied to total proceeds)
- 35% of the net gain (sale price minus the original cost basis, inflation-adjusted, plus deductible improvements)
Example:
- Non-resident bought property in 2019 for $1,500,000 MXN
- Sells in 2026 for $3,000,000 MXN
- Gain (simplified, before inflation adjustment): $1,500,000 MXN
Option 1: 25% × $3,000,000 = $750,000 MXN tax Option 2: 35% × $1,500,000 = $525,000 MXN tax
In this example, Option 2 (35% of gain) produces lower tax. The notario calculates both options and applies the lower.
Critical documentation for sellers: To use Option 2, you must have documentation of your original acquisition cost (the original escritura and any closing cost receipts). Missing documentation forces the notario to apply the less favorable Option 1. Keep your purchase documents permanently.
Tax Treaties
The US-Mexico tax treaty and Canada-Mexico tax treaty address how capital gains from Mexican property are treated in your home country. Generally, gains taxed in Mexico receive a foreign tax credit in the US or Canada to avoid double taxation. A cross-border tax advisor should be consulted before selling any significant property.
Rental Income Tax (for Investor Owners)
If you earn rental income from Mexican property, Mexico requires tax reporting even as a non-resident.
For non-residents renting Mexican property:
- Option A: 25% withholding on gross rent (no deductions)
- Option B: 35% of net income (after deductions: depreciation, management fees, maintenance, property taxes, insurance, mortgage interest if applicable)
Many non-resident investors find Option B produces a lower effective rate once legitimate deductions are applied. However, this requires maintaining proper records and filing Mexican tax returns (or working with a Mexican accountant who files on your behalf).
VAT on commercial rentals: Residential rentals to individuals are generally exempt from IVA (Mexico’s 16% VAT). Short-term vacation rentals operating commercially may have VAT obligations — a nuanced area worth clarifying with a local accountant.
Inheritance and Estate Considerations
Mexico does not have a federal inheritance or estate tax on real property transferred by inheritance. Heirs receiving Mexican property pay ISABI at the assessed fiscal value (typically well below market), making inherited real estate transfers relatively tax-efficient.
However, your home country’s estate tax rules may apply to Mexican property held in your estate. US citizens and permanent residents face US estate tax rules that apply to worldwide assets. Proper cross-border estate planning (will structure, how the property is held) is worth addressing proactively.
Summary: What You Pay as a Merida Property Owner
| Tax | When Paid | Who Pays | Rate |
|---|---|---|---|
| Predial | Annually | Owner | Low (~0.1-0.3% of fiscal value) |
| ISABI (transfer) | At purchase closing | Buyer | 2% of purchase price |
| Capital gains | At sale | Seller | 25% gross or 35% net gain |
| Rental income | Annually or withheld | Landlord | 25% gross or 35% net |
The low predial combined with the relatively straightforward transfer tax makes Merida one of the more financially transparent property markets in Latin America. The capital gains treatment for non-residents is manageable with proper documentation and planning.
Questions about how Mexican property taxes affect your specific situation? We can connect you with bilingual accountants and tax advisors who specialize in cross-border real estate ownership.