There are an estimated 1,000,000 Americans living in Mexico.
There are plenty of good reasons for moving to Mexico: the climate, the people, the colorful culture, the cuisine, the beaches, the markets, the cost of living... the list goes on and on. As an American expatriate living in Mexico though, what exactly do you need to know regarding filing US expat (and Mexican) taxes?
If you have assets abroad worth over US$200,000, you should also file form 8938 declaring them.
"Residents must pay taxes for their worldwide income, non-residents must pay only for income earned from Mexican sources." - Santander
If you have more than US$10,000 in aggregate in foreign bank accounts at any time during the tax year, you should also file FinCEN form 114, also known as an FBAR (Foreign Bank Account Report).
The US and Mexican governments share taxpayer info, and Mexican banks pass on their US account holders' account info to the IRS, so it's not worth being economical with the truth or burying your head in the sand. The penalties for tax evasion for expats are harsh to say the least.
If you're a US citizen or green card holder (including dual citizens) and you have been living in Mexico for some time but weren't aware you needed to file a US return, don't worry: there's a program called the IRS Streamlined Procedure that allows you to catch up on your filing without paying any fines. It's a good idea to do this soon though, before the IRS comes to you.
Mexican tax returns are due on April 30th, while estimated taxes owed should be paid on a monthly basis by the 17th of the month following the date the money was earned The Mexican equivalent of the IRS is called the SAT (Servicio de Administración Tributaria), or is sometimes known as 'Hacienda'.
SAT has a rather clumsily translated English language section on foreigners' tax obligations on their website here.
There's no capital gains tax in Mexico, so if you sell a property for example your gain after allowable costs is considered income.
You can find information on Mexican income tax rates here.
We strongly recommend that if you have any doubts or questions about your tax filing situation as a US expat living in Mexico, that you contact an expat tax specialist.
At Bright!Tax, we have clients in over 150 countries worldwide. US expat tax is all we do and we are very good at it. If you have any questions regarding your personal situation, don't hesitate to contact us and we'll be happy to help.