Mexico is one of the most popular destinations for expats, offering a warm climate, diverse culture, and relatively low cost of living. Whether you move for work, retirement, or remote life by the beach, it’s essential to understand how Mexico’s tax system works before you settle in.

This guide breaks down everything you need to know about taxes in Mexico for 2026, including residency rules, income tax rates, deductions, and how to file your return.

The Basics of the Mexican Tax System

Mexico’s tax system is overseen by the Tax Administration Service (Servicio de Administración Tributaria, or SAT). It uses a progressive income tax structure and applies both to residents and non-residents, depending on the source of their income.

The tax year runs from January 1 to December 31, and the filing deadline for individual tax returns is April 30, 2027.

Employees generally have taxes withheld from their salaries, while self-employed individuals and freelancers must file their own annual declarations.

Who Has to Pay Taxes in Mexico

Your tax residency status determines your obligations.

You are considered a tax resident in Mexico if you:

• Have your main home (center of vital interests) in Mexico, or

• Spend more than 183 days in the country during a calendar year, whether consecutive or not.

If you are a resident, you are taxed on your worldwide income.
If you are a non-resident, you pay tax only on income earned in Mexico, such as employment, property rental, or business income.

Example:
If you move to Mexico City for a permanent job, you will be taxed on your global income. If you live abroad but rent out a property in Cancun, you will pay Mexican tax only on that rental income.

Income Tax Rates in Mexico for 2026

Mexico’s personal income tax is progressive, ranging from 1.92% to 35%.

In addition to federal income tax, some states charge small local taxes, usually less than 3%.

Non-residents pay fixed rates based on income type. For example:

• Employment income: 15% to 30%

• Business income: 25% flat rate

• Rental or investment income: 15%

Social Security Contributions

Social security contributions are mandatory for employees and fund healthcare, pensions, and other benefits through the Mexican Social Security Institute (IMSS).

• Employees contribute about 2% to 10% of their salary.

• Employers contribute around 25% to 30% of payroll.

• Self-employed individuals can choose to contribute voluntarily to access benefits.

Deductions and Allowances

Mexico allows a variety of deductions that can help reduce your taxable income. These apply mainly to residents who file annual returns.

Common deductible expenses include:

• Medical, dental, and hospital expenses for you or dependents.

• Health and life insurance premiums.

• Educational expenses, including tuition at approved schools.

• Mortgage interest payments on your main home.

• Donations to registered charities.

• Retirement savings contributions (Afore or private funds).

• Funeral expenses for dependents.

Example:
If you earn 800,000 MXN per year and pay 40,000 MXN in health insurance and 60,000 MXN in mortgage interest, those deductions can reduce your taxable income — and your final tax bill.

Double Taxation Treaties

Mexico has double taxation agreements (DTAs) with more than 60 countries, including the United States, Canada, the United Kingdom, and most of the European Union.

These treaties prevent you from being taxed twice on the same income and determine which country has the right to tax specific types of earnings.

If you have already paid income tax abroad, you may be eligible to claim a foreign tax credit in Mexico. Always check your country’s treaty terms before filing.

How to File Taxes in Mexico

Tax filing in Mexico is largely digital and handled through the SAT online platform.

Step 1: Register for your RFC (Registro Federal de Contribuyentes) — your unique tax identification number. You’ll need it for employment, business, or property ownership.

Step 2: Gather your documents
Collect digital invoices (CFDI), proof of income, and receipts for deductible expenses. All receipts must include your RFC to qualify as deductions.

Step 3: File your return
Log in to the SAT portal (https://www.sat.gob.mx) and complete your annual declaration between March 1 and April 30, 2027. The system automatically pre-fills much of your information.

Step 4: Pay or claim a refund
If you owe taxes, payments can be made online or at authorized banks. Refunds are typically processed within 30–45 days.

Tax Tips for Expats in Mexico

• Register for your RFC as soon as you move you’ll need it for all official and financial transactions.

• Keep all electronic invoices (CFDIs) they are required for deductions.

• If you earn income from abroad, verify whether it must be declared in Mexico under your residency status.

• Use a certified accountant familiar with expat taxation to ensure compliance.

• File early to avoid last-minute technical issues with the SAT portal.

• Remember to pay property tax (Predial) and, if applicable, Value Added Tax (IVA) on business or rental income.

Mexico’s digital tax system is modern and efficient once you learn how it works. With careful organization and professional guidance, filing taxes as an expat in Mexico can be a smooth experience.