Rental Income Taxes in Mexico: What Foreign Property Owners Need to Know

If you own property in Mexico and earn rental income — Airbnb, VRBO, long-term lease — you have Mexican tax obligations. Most foreign owners don’t know this. Many assume that because they don’t live in Mexico and pay taxes at home, they owe nothing here. That assumption is incorrect.

---

The Baseline Rule

Mexico taxes income generated within its territory regardless of the earner’s residency. Rental income from a Mexican property is Mexican-source income. Non-residents who earn it owe Mexican income tax (ISR).

---

Option 1: 25% on Gross Revenue (Non-Resident, No RFC)

Default rule for non-residents without a Mexican tax ID (RFC): 25% withholding on gross rental income, no deductions allowed.

• Your property manager or tenant is legally required to withhold and remit this to SAT
• In practice, many don’t — but the obligation falls on you
• Airbnb now reports host income to SAT annually

Example: $30,000 MXN/month → Tax = $7,500 MXN/month (25% gross, no deductions)

---

Option 2: 35% on Net Income (With RFC)

If you obtain a Mexican RFC (tax ID), you can pay 35% on net income after deductions:

• Property management fees
• Maintenance and repairs
• Insurance premiums
• Annual fideicomiso fee
• Depreciation on building structure

Example: $30,000 MXN gross → minus $10,000 expenses → net $20,000 → Tax = $7,000 MXN

For properties with significant costs, this can be better than the 25% gross rate.

---

Option 3: Progressive Rates for Mexican Tax Residents

If you hold Mexican temporary or permanent residency and file as a Mexican tax resident, rental income is reported on your annual Mexican tax return with progressive rates (1.92–35%) after deductions.

---

Airbnb and Platform Reporting

Since 2020, platforms operating in Mexico (Airbnb, VRBO, Booking.com) must report host income to SAT annually and collect IVA (16%) on their service fees. The SAT increasingly has visibility into rental income. Plan accordingly.

---

Municipal Lodging Taxes

Mérida municipality has introduced a lodging fee for short-term rentals (~$14–$20 MXN per night). Airbnb typically collects and remits this automatically — check your dashboard.

---

Home-Country Tax Treaties

For Americans: Mexican income taxes paid generally qualify for the Foreign Tax Credit (IRS Form 1116), reducing or eliminating double taxation on the same income. Similar provisions exist for Canadians under the Canada-Mexico tax treaty.

---

Practical Compliance Path

1. Hire a Mexican accountant familiar with rental real estate (~$3,000–$8,000 MXN/year)
2. Obtain RFC if you plan to deduct expenses
3. Keep records of all income and expenses
4. File quarterly/annual declarations via SAT portal (accountant handles)
5. Claim foreign tax credit in your home country

---

Property taxes (predial) → Can foreigners own property in Mexico? → Closing costs breakdown → Talk to an advisor →

---

Tax rules reflect Mexican law and SAT guidance as of mid-2026. Tax law changes frequently. This is informational — not tax advice. Work with a licensed Mexican accountant.