The seller's income tax on a Mexican property sale is computed by the notary at closing, under the notary's own responsibility, and paid within fifteen days of signing. Sellers rarely see the arithmetic before the day of the deed, which is why the figure so often arrives as a surprise. The Income Tax Law lays out every step, and a seller who understands them can estimate the tax months ahead and, more importantly, gather the documents that lower it.
This article follows the notary's calculation for the two kinds of seller the law distinguishes: a Mexican tax resident, who is taxed on the gain with a large exemption for a primary home, and a non-resident, who is taxed under a separate regime regardless of nationality. Residence is a tax concept under article 9 of the Federal Tax Code, not a passport question: a foreigner who lives in Mexico most of the year with their center of vital interests here is a resident for this purpose. The examples use the calculator's seller tab, with the indices and tariff in force on 16 October 2026.
Residents: the primary-home exemption
A resident who sells their primary home pays no income tax on the gain as long as the price does not exceed 700,000 UDIs, the inflation-indexed investment unit published daily by Banco de México. At the UDI value of mid-October 2026 that threshold is about 6.2 million pesos. Three conditions attach. The property must be the seller's home, proven to the notary with a voter card, electricity or landline bills, or bank statements showing that address in the name of the seller, their spouse or direct relatives. The seller must declare under oath that they have not used this exemption on another home in the previous three years, and the notary checks the SAT's records for the previous five. And the sale must be formalized before a notary, which in practice it always is.
When the price exceeds the threshold, the exemption does not vanish; it shrinks. Only the excess over 700,000 UDIs is taxed, and the deductions are taken in the same proportion. A home sold for nine million pesos with a threshold of 6.2 million has an excess of 2.8 million, roughly 31 percent of the price, so 31 percent of the gain is taxed and 69 percent is exempt. The arithmetic is in article 93, section XIX, of the Income Tax Law.
What the law lets you deduct
For the taxable part, the gain is the price minus four groups of deductions set in article 121: the documented purchase cost, brought to present value; investments in construction, improvements and extensions, excluding maintenance; the notary fees, taxes, registry fees and appraisal paid on the purchase and on the sale, together with any local tax on the sale; and the broker's commission on either end. Every one of these needs an invoice or a deed. A seller who cannot prove the purchase price falls back on a floor: the adjusted cost can never be less than ten percent of the sale price, which is a poor substitute for a receipt.
Bringing the purchase cost to present value follows article 124. The cost is split between land and construction, using the proportion in the appraisal or the cadastral record, or twenty percent land by default when no separation is possible. The construction part is reduced by three percent for each full year since the purchase, never below twenty percent of its original value, and both parts are then multiplied by an inflation factor built from the national consumer price index: the index of the month before the sale month's predecessor, divided by the index of the month before the purchase, as the Federal Tax Code's article 17-A prescribes. For a home bought in June 2016 and sold in October 2026, the factor is about 1.63, and the construction has lost thirty percent to the yearly reduction.
The years rule and the tariff
The taxable gain is not simply run through the annual tariff. Article 126 divides it by the number of full years between purchase and sale, capped at twenty, applies the year's annualized tariff to that slice, and multiplies the result back by the same number of years. The effect is that a gain accumulated over a decade is taxed as if it were ten smaller gains, which keeps most of it out of the top brackets. That amount is the provisional payment the notary withholds; the seller settles the final figure in the annual return the following April, where the remaining gain is added to other income and credits are applied.
Article 127 adds a separate five percent of the gain payable to the state where the property sits, but it is credited against the federal provisional payment, so it changes where the money goes, not how much. Guanajuato is the exception among the states we cover: its own cedular tax of five percent on real estate gains is a genuine additional charge, deductible from the federal base but not creditable against it.
Non-residents: 25 percent of the price, or 35 percent of the gain
A seller who is not a Mexican tax resident is taxed under article 160. The default is 25 percent of the gross price with no deductions at all. The alternative, available whenever the sale is formalized before a notary and without the need to appoint a representative in Mexico, is 35 percent of the gain computed under the same deduction rules as residents. The notary calculates whichever the seller elects, records it in the deed and pays it. The primary-home exemption does not apply to non-residents, and neither does the years rule.
Which option is better depends entirely on the documented cost. A Puerto Vallarta condominium bought in 2018 for three million pesos and sold in 2026 for five million has an adjusted cost of about 3.56 million and a gain of 1.44 million: 35 percent of the gain is 505,589 pesos, against 1.25 million at the flat rate. The same price on a property bought in 2010 for one million produces a gain of 3.77 million, and now the flat rate, 1.25 million, is the cheaper of the two. A non-resident who kept the purchase deed, the improvement invoices and the appraisal has a choice; one who did not is paying a quarter of the price.
Worked examples
All figures from the calculator as of 16 October 2026, in pesos. The threshold for the primary-home exemption on that date is 6,199,633 pesos.
| Sale | Seller | Taxable gain | Income tax at closing |
|---|---|---|---|
| Guadalajara home, 3,000,000, bought June 2016 for 1,200,000 | Resident, primary home | 0 (fully exempt) | 0 |
| Guadalajara home, 9,000,000, bought June 2016 for 3,000,000, with 150,000 in purchase costs and 270,000 in sale costs | Resident, primary home | 1,483,709 (31% of the gain) | 118,349 |
| Same sale, no proof of purchase or sale costs | Resident, primary home | 1,643,809 | 142,529 |
| Zapopan second home, 4,000,000, bought January 2019 for 1,500,000 | Resident, not a primary home | 2,237,851 | 319,384 |
| Same sale, purchase price not documented (10% floor) | Resident, not a primary home | 3,600,000 | 623,937 |
| Puerto Vallarta condo, 5,000,000, bought March 2018 for 3,000,000 | Non-resident | 1,444,540 | 505,589 (35% of gain) against 1,250,000 (25% of price) |
| Puerto Vallarta condo, 5,000,000, bought March 2010 for 1,000,000 | Non-resident | 3,772,063 | 1,250,000 (25% of price) against 1,320,222 (35% of gain) |
| Los Cabos home, 8,000,000, bought June 2021 for 6,500,000 | Non-resident | 598,737 | 209,558 (35% of gain) against 2,000,000 (25% of price) |
| San Miguel de Allende second home, 7,000,000, bought May 2015 for 2,500,000 | Resident, not a primary home | 3,937,777 | 549,793 federal plus 196,889 Guanajuato cedular tax |
The table shows what notaries see every week. The Zapopan seller without a purchase deed pays nearly twice the tax of the one with it, on the same sale. The Los Cabos non-resident who bought recently and kept the papers pays a tenth of the flat rate.
What to do before you list
Locate the purchase deed and its closing statement, the invoices for construction and improvements, the appraisal that separates land and construction, and, for a primary home, two years of electricity bills or bank statements at the property's address. If you are a non-resident, obtain an RFC and consider whether your documented cost makes the 35 percent option worthwhile. Then run the calculator's seller tab with your own dates and amounts; it prints the exemption threshold, the inflation factor, the years used and the article behind each line, so that you can check the notary's figure against it. If you want the calculation checked against your documents before you sign a listing agreement, book a consultation. The first conversation is on us.
Sources: Ley del Impuesto sobre la Renta, arts. 9 (residence, by reference to CFF art. 9), 93-XIX, 120, 121, 124, 126, 127 and 160; Reglamento de la LISR, arts. 155 and 209; Código Fiscal de la Federación, arts. 9 and 17-A; Anexo 8 of the Resolución Miscelánea Fiscal 2026 (tariff for art. 126); Banco de México, UDI series; INEGI, INPC. Full list on the calculator's sources page.
Figures verified against official publications on 16 October 2026. The threshold in UDIs, the inflation factor and the tariff change over time; the calculator shows the values it used. This article provides legal information, not legal or tax advice; no attorney-client relationship is created by reading it. © 2026 Terra Firma Attorneys at Law · terrafirma.law