Mexico Property Tax Guide 2026

Overview

Mexico's property tax system is divided among federal, state, and municipal levels. The federal government does not impose an annual property tax. Instead, municipalities levy the predial tax, and states levy the acquisition tax (ISAI). Capital gains on real estate are subject to federal ISR. Mexico does not impose any annual net wealth tax or real estate wealth tax, making property ownership relatively low-cost from a tax perspective.

Predial — Municipal Property Tax

The predial is the primary recurring property tax in Mexico, assessed and collected by each municipality (municipio). It is based on the cadastral value (valor catastral) of the property, which is typically significantly lower than market value. Key features:

• Rates range from 0.01% to 0.3% of the cadastral value annually
• Cadastral values are reassessed periodically by each municipality
• Bills are issued annually, usually payable in quarterly or bi-annual instalments
• Discounts of 8–15% are commonly offered for early payment (January–February)
• The tax applies to both residential and commercial properties
• Foreign owners pay the same rates as Mexican nationals
• Average annual predial for a typical home: approximately MXN 2,000–8,000 (USD 100–400)

Payment can be made at municipal offices, banks, or online through the municipality's portal. Unpaid predial can result in liens and foreclosure proceedings, though municipalities are generally lenient.

ISAI — Real Estate Acquisition Tax

ISAI (Impuesto Sobre Adquisición de Inmuebles) is a state-level tax imposed on the acquisition of real estate. It is a one-time tax payable by the buyer at the time of purchase. Key features:

• Rates vary by state, typically between 2% and 5% of the property value
• The tax base is the higher of the purchase price or the cadastral value
• Some states have progressive rates based on property value
• First-time homebuyer exemptions or reduced rates may apply in some states
• ISAI is due at the time of notarisation (escrituración) before a Mexican notary public
• Property transfers through inheritance or between spouses may be exempt

The notary handles ISAI payment as part of the closing process. Buyers should budget 2–5% of the purchase price for ISAI plus notary and registration fees.

Capital Gains on Property (ISR)

Profits from the sale of real estate in Mexico are subject to ISR as capital gains. The gain is the difference between the sale price and the tax-cost basis (adjusted for inflation). Key rules:

• Capital gains on property are added to the seller's other income and taxed at ISR progressive rates of 10–35%
• The cost basis is adjusted for inflation using the INPC (National Consumer Price Index)
• Improvements and construction costs can be added to the cost basis
• Primary residence exemption: gain on sale of a primary home is exempt if the sale price does not exceed approximately MXN 1.5 million (or MXN 750,000 for subsequent sales within 3 years)
• Non-resident sellers face a flat 25% withholding on the gross sale price (or 35% on net gain if documented)
• Depreciation recapture rules may apply for commercial properties

It is recommended to engage a Mexican tax advisor when selling property to properly calculate the inflation-adjusted cost basis and applicable exemptions.

No Annual Wealth Tax

Mexico does not impose an annual wealth tax (impuesto al patrimonio) on property holdings. The predial is the only periodic tax associated with property ownership. There have been periodic proposals for a wealth tax (see Wealth Tax guide), but none have been enacted. The absence of a wealth tax makes Mexico attractive for high-net-worth individuals considering property investment.

Rental Income Tax

Income from renting property is subject to ISR. For individuals, rental income is taxed at progressive ISR rates of 1.92–35% after deductions. Key features:

• A standard deduction of 35% of gross rental income applies (covering maintenance, administration, etc.)
• Alternatively, actual expenses can be deducted (property tax, insurance, repairs, mortgage interest, etc.)
• Property tax (predial) paid by the owner is deductible
• Monthly provisional returns are required for rental income
• Non-resident landlords: 35% withholding on gross rental income

FAQs

Do foreigners pay different property taxes?

No. Property taxes in Mexico are non-discriminatory. Foreigners pay the same predial, ISAI, and capital gains taxes as Mexican nationals. However, foreign buyers of residential property within 50 km of the coast or 100 km of the border must purchase through a bank trust (fideicomiso).

How is cadastral value determined?

Each municipality maintains a cadastral registry (catastro) with assessed values based on location, size, construction quality, and recent sales data. Cadastral values are generally much lower (30–60%) than market value.

Can I deduct property taxes on my ISR return?

Yes, property taxes paid (predial) on real estate that generates income (rental) are deductible against that rental income. Predial on a primary residence is not deductible.

What happens if I don't pay predial?

Unpaid predial accrues interest and penalties. The municipality may eventually place a lien (gravamen) on the property and, in extreme cases, initiate foreclosure proceedings. Most municipalities offer payment plans for overdue amounts.

Disclaimer

This guide provides general information about Mexican property taxes for the 2026 tax year. Tax laws and rates vary by state and municipality and may change. The information is based on published SAT and municipal data and may not reflect individual circumstances. Always consult with a qualified Mexican tax advisor (contador) or local authorities for advice specific to your situation. InvestmentKit does not provide tax advice.