US Expat Taxes in Mexico

Tax Treaty Information

FBAR & FATCA Requirements

A US person generally must file an FBAR when the combined value of reportable foreign financial accounts exceeds $10,000 at any time in the calendar year and they have a financial interest in, or signature authority over, those accounts. Check the applicable exceptions. Directly owned foreign real estate itself is not reported on FBAR or Form 8938; related financial accounts and entity interests need separate assessment. Form 8938 is a separate requirement. For individuals who meet the foreign tax-home and presence-abroad conditions, the thresholds are more than $200,000 at year-end or $300,000 during the year if unmarried or filing separately, and $400,000 or $600,000 respectively if filing jointly. The presence test requires either a US citizen's bona fide foreign residence including a full tax year, or at least 330 full days abroad in a qualifying 12-month period ending in the reported tax year. Lower thresholds apply when these living-abroad conditions are not met. If no income tax return is required, Form 8938 is not required. Important note about fideicomisos: Revenue Ruling 2013-14 addresses specific Mexican land-trust arrangements and concludes that they are not trusts for US federal tax purposes when the bank only holds and transfers title as directed and the owner retains control and responsibility. The ruling does not apply if the bank holds other assets or can undertake additional activities. Review the actual agreement before deciding which US reporting forms are required.

Foreign Earned Income Exclusion (FEIE)

For tax year 2026, the maximum Foreign Earned Income Exclusion is $132,900 per qualifying person, subject to the amount of eligible income and the qualifying period. You must have foreign earned income and a foreign tax home, and meet the applicable bona fide residence or physical presence test. The physical presence test generally requires 330 full days abroad in a consecutive 12-month period; bona fide residence includes an entire tax year and has citizenship or nationality conditions. Pensions and Social Security are not foreign earned income. Excluding self-employment income does not reduce self-employment tax, and the exclusion does not guarantee that all US income tax disappears. Remaining income is taxed using the rates that would apply without the exclusion. Compare the exclusion with the Foreign Tax Credit using your actual income and eligible foreign income taxes. You cannot claim a credit for taxes on income excluded under the FEIE. Do not select a method solely because your income is below the exclusion limit.

Before choosing filing help, review the scope of our US expat tax preparation services and confirm which returns and forms your engagement would include.

Common Tax Issues in Mexico

• 1RFC registration: SAT's published individual-registration checklist asks foreign applicants for a valid immigration document, proof of tax address and identification. It also lists additional documents for applicants resident abroad and for legal representatives. Pre-register where applicable and book a SAT appointment; confirm which documents apply to your situation before attending.
• 2RESICO eligibility: Article 113-E covers qualifying individual business, professional and rental activities, with a MXN 3.5 million income limit and additional conditions and exclusions. The statutory monthly rates range from 1% to 2.5% on qualifying collected receipts excluding IVA, without deductions. Eligibility is not established solely by being a freelancer or earning below the limit. SAT's guidance for the 2025 annual return filed in 2026 describes possible relief from that return under rule 3.13.7; check the applicable year, other income and current rules before assuming no annual return is needed.
• 3Remote work and immigration: Confirm the appropriate status with the Mexican consulate or INM for your work and payment arrangements. The Omaha consulate’s temporary-residence guidance distinguishes salary paid abroad from a Mexican job offer paid locally, which requires prior INM authorization. Assess tax residence separately under Article 9 of the Código Fiscal de la Federación. Do not use a visa label or a stay length as a substitute for either review.
• 4ISR income tax: Article 1 of the Mexican income tax law sets out the resident and non-resident scope. The 2026 annual tariff in SAT Annex 8 uses a fixed amount plus a marginal percentage; do not use it as a monthly table. Article 150 generally calls for an individual annual return during the following April, with exceptions and regime-specific relief.
• 5Fideicomiso classification: IRS Revenue Ruling 2013-14 provides a fact-specific conclusion for the Mexican land-trust arrangements it describes. Compare the bank powers, assets and owner responsibilities in your agreement with that ruling before deciding on foreign-trust reporting.
• 6Rental income: IRS Publication 527 generally uses Schedule E for residential rent and expenses, with different treatment when substantial tenant services are provided. Keep income, expense and personal-use records. Assess Mexican rental obligations separately, and test any Mexican income tax for US foreign tax credit eligibility rather than assuming every withholding is creditable.
• 7Social security coverage: Mexico is not on the SSA list of agreements in force checked September 24, 2026. Assess US and Mexican contribution obligations for your actual work arrangement; do not treat income tax treaty relief as a social security coverage exemption.
• 8IVA border stimulus: Confirm the business location, activity, required notice and exclusions under SAT’s northern-border rules before using the reduced rate. Do not include IVA as a foreign income tax credit on Form 1116.
• 9Predial and US deductions: Check the property’s municipal bill for the amount due. Foreign real-property tax on a personal-use home is not deductible as an itemized deduction. IRS Publication 54 distinguishes expenses incurred in a trade or business or in producing income; assess rental or business use separately.
• 10Currency conversion: US returns generally report amounts in dollars. Where the dollar is your functional currency, IRS guidance calls for the exchange rate applicable when the income or expense is received, paid or accrued. Keep the original peso amounts, dates and conversion method. Account-reporting forms have their own valuation instructions; do not assume one annual average works for every figure.

Local Resources

Frequently Asked Questions: US Taxes in Mexico

Related Country Guides