Property Tax Overview in Mexico

Mexico does not levy a federal annual property tax. The country's property tax system is instead built around three distinct events: owning (the predial), buying (the ISAI), and selling (ISR on any capital gain). A fourth layer applies specifically to foreign buyers purchasing inside the restricted coastal and border zone, where a bank trust called a fideicomiso is the legally required ownership vehicle.

What is the predial and how much does it cost?

The predial is Mexico's annual property tax. Under Article 115 of the Mexican Constitution, each of the country's roughly 2,400 municipalities sets its own rate and collects the revenue directly. Rates are applied to the valor catastral -- the government's assessed value of land plus construction -- which typically sits well below market value. Effective rates generally fall between 0.05 and 1.2 percent of cadastral value, with most urban municipalities in the 0.1 to 0.35 percent band. A home with a cadastral value of 2 million MXN might owe roughly 3,800 to 7,000 MXN per year -- far less than comparable property tax bills in the United States or Canada.[1]

Payment is due annually, and virtually every municipality offers early-payment discounts. Paying in January typically earns a 20 to 25 percent reduction; February payments attract discounts of 15 to 20 percent. Quintana Roo municipalities such as Cancun (Benito Juarez) and Playa del Carmen (Solidaridad) offer up to 25 and 20 percent respectively for payments made by 28 February.[2] Predial applies equally to Mexican nationals and foreign owners. Unpaid predial creates a lien that blocks any future property sale.

What is the ISAI acquisition tax?

The impuesto sobre adquisicion de inmuebles -- commonly called ISAI or, in some states, ISABI -- is a one-time state-level tax triggered by any real estate purchase. The buyer pays it, and the notario publico collects it at closing before remitting it to the relevant state treasury.

Rates vary by state and in some cases by property value. Jalisco charges a flat 2 percent. Nuevo Leon applies 2 to 3 percent. Quintana Roo charges approximately 2 percent. Mexico City uses a progressive schedule that can reach roughly 3 to 4.5 percent on higher-value properties. The Estado de Mexico reaches 4 to 5.6 percent. Nationally, the range runs from roughly 2 to 5 percent.[3] The tax base is the highest of three figures: the declared purchase price, the cadastral value, or a commercial appraisal -- preventing buyers from under-declaring sale prices to reduce the tax.

ISAI applies not only to standard arms-length sales but also to inheritance transfers (with some state-specific modifications), gift transfers between non-family members, and certain corporate-restructuring transfers.

How is ISR capital gains tax calculated on a property sale?

When a property is sold, the seller may owe impuesto sobre la renta (ISR) on any capital gain. Mexico's tax authority, the Servicio de Administracion Tributaria (SAT), requires the notario publico to calculate and withhold this tax directly at closing, remitting it to the federal treasury on the seller's behalf.

For Mexican tax residents, the gain is the sale price minus the original acquisition cost (adjusted for inflation using the INPC consumer price index), documented capital improvements, and allowable closing costs. The net gain is then taxed at progressive individual income tax rates ranging from 1.92 to 35 percent. Non-residents face a flat withholding of 25 percent of the gross sale price (or, alternatively, they may elect to pay tax on the net gain if the resulting liability is lower).[4]

A primary-residence exemption -- the casa habitacion exemption under Article 93, Fraction XIX of the Ley del Impuesto Sobre la Renta -- can eliminate ISR entirely on qualifying sales. The exemption covers gains up to 700,000 unidades de inversion (UDIs). With the UDI value at approximately 8.834 MXN in June 2026, that ceiling equals roughly 6,184,000 MXN (about 310,000 USD at prevailing exchange rates). The exemption is available once every three years; using it for one property sale resets the clock. If a sale produces a gain above 700,000 UDIs, only the excess portion is taxed.[5]

To qualify, the property must have been the seller's actual primary residence. The seller declares this to the notary under penalty of perjury. The notary verifies through SAT's portal whether the seller has used the exemption within the prior five years, and reports the transaction regardless of whether tax is withheld.

Who qualifies for the primary-residence exemption?

The casa habitacion exemption is available to physical persons (individuals, not corporations) who are Mexican tax residents at the time of sale. Non-residents -- including foreign nationals who own Mexican property without establishing Mexican tax residency -- do not qualify. Mexican tax residency generally requires that Mexico be the center of the taxpayer's vital interests or that the taxpayer spends more than 183 days per year in the country.

Co-titled properties allow each qualifying co-owner to claim a separate 700,000 UDI exemption against their proportional share of the gain, potentially doubling the total shelter for a couple who both hold title.

If the sold property included land beyond three times the built floor area, the excess land portion is not covered by the exemption and its proportional gain remains taxable.[5]

How does the fideicomiso work for foreign buyers in the restricted zone?

Article 27 of the Mexican Constitution prohibits foreign nationals from holding direct title to property in the zona restringida -- defined as all land within 50 kilometres of any coastline and 100 kilometres of any international border. This zone covers the most popular foreign-buyer markets: the Riviera Maya, Los Cabos, Puerto Vallarta, Cancun, and all border cities.

The workaround is the fideicomiso: a Mexican bank holds legal title to the property as trustee, while the foreign buyer is the beneficiary with full rights to use, rent, renovate, sell, and bequeath the property. The trust runs for 50 years and can be renewed indefinitely for successive 50-year terms. Foreign buyers also need a permit from the Secretaria de Relaciones Exteriores (SRE) before establishing the trust; the notary typically handles this filing as part of closing.[6]

Setup costs run approximately USD 2,000 to 3,000. Annual bank trustee fees range from roughly USD 550 to 1,000 depending on the bank and property value. The predial is paid by the beneficiary directly to the municipality exactly as it would be for a direct-ownership property. Outside the restricted zone, foreign nationals can hold direct title to Mexican property with no trust requirement.

For the full country context including income tax rates and residency rules, see the Mexico country overview. For rules specific to capital gains across asset types see the Mexico capital gains overview.

Property tax obligations in Mexico interact with federal, state, and municipal rules simultaneously. Rates, exemptions, and administrative requirements differ across Mexico's 32 states and 2,400-plus municipalities. A qualified tax professional familiar with the specific state and municipality where the property is located can confirm current rates, calculate withholding accurately, and ensure the notario has all necessary documentation before any transaction closes.