Rental income tax for residents of Mexico

What counts as rental income

Article 114 covers income from leasing or subleasing and, more generally, from granting the temporary use or enjoyment of real estate “in any other form” for a payment, and the income of non-amortisable real estate participation certificates. Rents owed but not yet received are declared in the calendar year in which they are collected.

Two ways to deduct

Option 1: actual expenses (art. 115). The landlord may deduct:

1. Predial (property tax) for the year, local improvement levies, and any local tax on rental income.
2. Maintenance that does not add improvements, and water, if the tenant does not pay them.
3. Real interest paid on a loan used to buy, build or improve the property, with a tax invoice. “Real” interest is the part above the annual inflation adjustment.
4. Salaries, fees and related contributions actually paid.
5. Insurance premiums on the property.
6. Investments in construction, including additions and improvements.

Option 2: the flat deduction. The landlord may instead “deduct 35% of the income”, in place of the items above. Under this option the landlord may also deduct the predial for the year.

Written as formulas:

• Option 1: taxable income = rent - actual deductible expenses
• Option 2: taxable income = rent - 35% of rent - predial

If the owner lives in part of the property or lets part of it for free, the deductions are reduced pro rata by built area. Where the property was let for only part of the year, items 1 to 5 are deductible only for the rental period or the three months before it began.

Monthly or quarterly payments

Under art. 116 the landlord files provisional payments no later than the 17th of the month following the period. The rate comes from the monthly table of article 106, applied to income minus the deductions of that period (the 2026 monthly tables are in Annex 8 of the Miscellaneous Tax Resolution; every table starts at 1.92% and tops out at 35%).

A landlord whose only income is rent, and whose monthly rent does not exceed ten minimum wages raised to the month, may pay quarterly. As the Constitution’s transitional article reads the minimum wage as the UMA in federal laws, this is a calculation, not a quoted figure: 10 x MX$3,566.22 (the UMA monthly value in force from 1 February 2026, INEGI) = MX$35,662.20 a month. The VAT law has a matching quarterly option (LIVA art. 5-F).

Tenant withholding

When the tenant is a company (persona moral), it must withhold 10% of the rent as a provisional payment, without deduction, and give a tax receipt for the amount withheld. The landlord credits that withholding against the provisional payment. A company may skip issuing its own receipt if the landlord issues a tax invoice showing the amount withheld.

Properties held through a bank trust

Foreigners who own a home in a restricted zone through a fideicomiso (a bank trust) are covered by art. 117. Income is treated as that of the fideicomitente, the person who put the property in the trust, even if the beneficiary is another person, except for irrevocable trusts where the settlor cannot recover the property; then it is the beneficiary’s income. The trustee bank makes provisional payments of 10% of the income of the previous four months, without deduction, in May, September and January, and gives a tax receipt by 31 January. Art. 118 adds that the bank keeps the books, issues the invoices and makes the provisional payments. See also renting out a fideicomiso property.

Other obligations

Art. 118 requires the landlord to register with the tax authority (RFC), keep accounts under the Federal Tax Code, issue tax invoices (comprobantes fiscales) for rent received, file provisional and annual returns, and report cash receipts above MX$100,000 by the 17th of the following month. In a lawsuit for unpaid rent, the court asks the landlord to show the invoices were issued and must notify the SAT if not.

The annual return is due in April of the following year (art. 150).

Is rent exempt from VAT?

The VAT law (art. 20-II) exempts the rental of property used exclusively as a dwelling, but “this does not apply” to property supplied furnished or used as hotels or guest houses. The rate is 16% (art. 1).

Which professional to consult

• A tax accountant to choose between the options, register and file.
• A real estate lawyer to check the lease: real estate lawyer page.
• A notary, if the lease is registered or notarised under state law: notary page.