Capital gains tax on Mexican property: how it works

What counts as a sale

Article 119 takes its definition of sale (“enajenación”) from the Federal Tax Code. Exchanges count as two sales. The income is the consideration obtained, including amounts payable on credit; where there is no consideration, the value of an appraisal (avalúo) by a person authorised by the tax authorities is used. Transfers on death, by gift or by merger are not sales for the person who transfers (see inheritance and gifts).

The formula

Written as a formula, not as an example:

gain = sale price - (updated acquisition cost + updated improvements + updated deductible costs)

Article 121 lists what the seller may deduct:

1. The documented acquisition cost, updated under article 124. For real estate, the updated cost is at least 10% of the sale amount.
2. Investments in construction, improvements and extensions, updated. Maintenance and repair costs are excluded.
3. Notary fees, taxes and duties on the purchase deed and the sale deed, and the local tax on the income from the sale paid by the seller. Appraisal fees are deductible.
4. Commissions and brokerage paid by the seller on the purchase or the sale.

Items 3 and 4 are updated from the month of payment to the month before the sale.

Land, building and 3% a year

Article 124 splits the cost. The land value is subtracted from the acquisition cost and the rest is the construction cost. If the deed does not separate them, 20% of the total cost is treated as land. The construction cost is then reduced by 3% for each year between purchase and sale, and “in no case” below 20% of the initial cost. The reduced cost is updated for inflation from the month of purchase to the month before the sale. Improvements follow the same treatment. For land alone, the cost is only updated.

The updating method uses an inflation index; the law gives the period and the Federal Tax Code supplies the factor mechanics, which this guide does not reproduce.

A property received by inheritance, legacy or gift takes the cost and date of the deceased or donor (art. 124); if the donor paid tax on the gift, the appraisal used for that tax becomes the cost.

Averaging over the years held

Article 120 does not tax the whole gain at once at the top bracket:

1. Divide the gain by the number of years between purchase and sale, capped at 20.
2. Add that yearly share to the seller’s other taxable income of the sale year and compute the tax on it with the annual table.
3. Tax the rest of the gain at a rate derived from the table, either the rate of the sale year or the average of the last five years’ rates.

If the price is paid in instalments over more than 18 months and the tax authority’s interest is secured, the tax on the non-cumulative part can be paid in the years the money is received.

The notary’s provisional payment

For sales by public deed the seller does not pay first. Article 126 requires a provisional payment per transaction: the gain is divided by the years held (maximum 20), the table is applied, and the result is multiplied back by the same number of years. The notary calculates it “under their responsibility” and pays it within fifteen days of the signing (form R46, RMF rule 3.15.15). The 2026 provisional table (RMF Annex 8, part A.I) starts at 1.92% on the first MX$10,135.11 and its top rate is 35% above MX$5,107,703.93 of the annualised gain.

The provisional payment is then credited in the annual return. A state-level 5% payment is made alongside; see state tax on property gains.

Losses and appraisals

A loss on selling real estate can be offset against other income, except wages and certain other categories, over the sale year and the following three years, using a formula that divides the loss by the years held (maximum ten for losses; art. 122).

The tax authority may order or accept an appraisal. If it exceeds the agreed price by more than 10%, the whole difference is treated as income of the buyer, and the buyer’s cost rises by the same amount (art. 125).

Non-residents and the main-home exemption

A seller who is not a Mexican tax resident does not use this calculation by default: the default is 25% of the gross price (selling as a non-resident). A resident’s main home up to a ceiling is exempt (home sale exemption).

Which professional to consult

• A notary, who computes the provisional payment and the state payment at the signing: notary page.
• A tax accountant for the annual return and the averaging choice.
• An appraiser if a valuation is needed: appraiser page.