Inheritance and Estate Tax in Mexico

Does Mexico have an inheritance or estate tax?

Mexico has no federal inheritance tax and no federal estate tax. The federal-level succession levy was abolished decades ago, and the Mexican Constitution (Article 31, Section IV) reserves direct-tax authority exclusively with the federation -- meaning individual states cannot introduce their own inheritance tax either. As a result, heirs and legatees in Mexico do not face a separate estate or inheritance tax at the federal or state level when they receive assets from a deceased person.

What Mexico does have is the Impuesto Sobre la Renta (ISR), administered by the Servicio de Administracion Tributaria (SAT). Inheritances fall under ISR as a category of income -- but they are classified as exempt income under Article 93, Fraction XXII of the Ley del Impuesto Sobre la Renta (LISR). The statutory text reads: "Los que se reciban por herencia o legado" -- income received by inheritance or legacy is exempt. This exemption applies regardless of the value of the inheritance and applies to all heirs, not just spouses or family members.

One important condition applies to the exemption: under Article 150 of the LISR, physical persons (individuals) who receive exempt income from an inheritance exceeding MXN 500,000 in a calendar year are required to declare that income in their annual tax return (declaracion anual), which is due in April for the prior fiscal year. Failure to declare does not make the income taxable as such, but failing to report when required can expose the heir to penalties and, in a tax-discrepancy audit, the SAT may reclassify undeclared income as taxable. Reporting the inheritance correctly is therefore required to preserve the exemption in practice.

Are gifts (donaciones) treated the same as inheritances?

Gifts (donaciones) during the giver's lifetime are governed by Article 93, Fraction XXIII of the LISR, which carves out a narrower exemption than the blanket inheritance rule.

Fully exempt gifts include those:

• Between spouses, regardless of amount (subsection a).
• Received by descendants from their ascendants in direct line -- for example, a parent giving money or property to a child or grandchild (subsection a).
• Received by ascendants from descendants in direct line, provided the ascendant does not subsequently re-gift or transfer the asset to another descendant without degree restriction (subsection b).

Partially exempt gifts cover all other cases (subsection c). Gifts not falling into the family categories above are exempt only up to a cumulative annual threshold of three times the daily general minimum wage (salario minimo general), multiplied by 365. Since 2023 Mexico has used the Unidad de Medida y Actualizacion (UMA) for some statutory thresholds, but this particular gift exemption in Article 93 Fraction XXIII(c) has continued to reference the minimum wage (salario minimo). For 2025, the general minimum wage was MXN 278.80 per day (MXN 312.41 in the northern border zone), giving an approximate exempt ceiling near MXN 305,000 for non-family recipients in general areas. Any amount above that threshold is treated as taxable "otros ingresos" (other income) for the recipient, subject to progressive ISR rates up to 35%.

For reporting purposes, Article 150 of the LISR requires individuals to declare gifts (along with loans and prizes received) in their annual return when the aggregate total of such items across the year exceeds MXN 600,000. This reporting threshold is separate from the question of taxability -- a gift between a parent and child remains exempt regardless, but must appear in the return if other triggering amounts push the 600,000 threshold.

What happens when inherited property is sold?

The ISR exemption on receiving an inheritance applies only at the moment of transfer. When an heir later sells an asset received by inheritance, the disposal is treated as a standard alienacion de bienes (sale of assets) under Chapter IV, Title IV of the LISR, and ISR on capital gains (ganancias de capital) applies.

For real estate specifically, the capital gain is calculated as the difference between the sale price and the acquisition value (costo de adquisicion), adjusted for inflation using the INPC (Indice Nacional de Precios al Consumidor). The acquisition value for inherited property is generally taken as the fair market value of the property at the date of the decedent's death as recorded in the notarial deed (escritura). Mexico does not provide a full step-up in basis to current market value in the way the US does; instead, heirs carry forward the deceased's adjusted cost basis unless the notarized succession documents establish a fresh appraised value for the inheritance proceeding.

Under Article 126 of the LISR, the notary public handling the real estate transaction is legally required to calculate the provisional ISR payment due on the gain and withhold it on behalf of the seller, remitting it directly to the SAT. This provisional monthly payment is computed by dividing the gain by the number of years between acquisition and sale (up to a maximum of 20 years), applying the progressive ISR rate table under Article 96 to that annualized gain figure, and multiplying back. When the seller cannot document their acquisition cost, the taxable base can default to 25% of the gross sale price (alternative calculation method). Documented deductions include notary fees, real estate commissions with CFDI (digital fiscal receipts), local acquisition taxes, and capital improvements backed by invoices.

One significant exemption exists for a seller's primary residence (casa habitacion) under Article 93, Fraction XIX of the LISR: gains up to 700,000 UDIs (approximately MXN 5.9 million as of 2025) are exempt from ISR on the sale of a primary residence, available once every three years, subject to proof of residency and registration requirements. An heir who subsequently uses an inherited property as their primary residence for the qualifying period may eventually become eligible to claim this exemption on a later sale, subject to satisfying all conditions at that time.

What state-level taxes apply to inherited real estate?

Although Mexico has no federal inheritance tax, receiving real estate by inheritance does trigger a state-level tax in most Mexican states: the Impuesto sobre Adquisicion de Inmuebles (ISAI), also called Impuesto sobre Traslado de Dominio in some states. Rates vary by state and typically range from approximately 2% to 4.5% of the property value as recorded in the deed. Some states (including Mexico City under certain conditions) offer reduced ISAI rates or exemptions for direct-line family inheritance transfers, but applicability depends on state law in force at the time of the transfer.

The notary administering the succession or estate formalization collects and remits the ISAI on behalf of the heir. Additional notarial and registration fees typically add another 4% to 7% of property value on top of the ISAI. Both of these costs are incurred at the time of formalizing the succession -- not at the time of any subsequent sale.

Do heirs need to register with the SAT?

Heirs who receive inheritances above MXN 500,000 are required to be registered in the Registro Federal de Contribuyentes (RFC) -- Mexico's federal taxpayer registry -- in order to file their annual return and properly claim the ISR exemption. Heirs who have not previously obtained an RFC may need to register for the first time. The SAT has specific procedures for registering individuals who receive income only from exempt sources such as inheritances.

For inherited real estate specifically, the notary will require the heir's RFC at the time of formalizing the succession deed. The heir also typically needs to obtain a tax appraisal (avaluo fiscal) of the property to establish the value for ISAI purposes and to document the acquisition value for future capital gains calculations.

See the Mexico country overview for additional context on the Mexican tax system, including residency rules, ISR rates, and filing calendar. For jurisdiction-specific guidance on your individual situation, consulting a qualified tax professional who is familiar with both Mexican civil succession law and ISR obligations is strongly recommended.