Sold house in Mexico - Is it taxable bt Mexico or the USA
QUESTION: Hello David
david ingram replies:
I em an naturalised citizen and I just sold my home in mexico .
My question is will my money be taxed when it enters the usa .
I plan to invest the money in a new house . thanks
There are two problems.
One, unless the home qualified for/as a homestead in Mexico, the sale will be taxed in Mexico.
It used to be that the Mexican home was tax exempt if it was your principal residence for two years but that was cancelled in 2002.
What the Mexican Notary (Notarios) Decide is Critical - the following was 'lifted' word for word from http://www.bajainsider.com/baja-business/taxes-mexico-real-estate.htm You may want to read the rest.
Under Mexican Income Tax Law, Notarios are jointly liable with the seller for all taxes due on the sale of real property in Mexico. If Hacienda (the equivalent to the Treasury Department in the US) decides the Notario did not calculate these taxes correctly, the Notario may be required by the tax authorities to make up the difference. Obviously, when they are doing dozens of transactions each year, very possibly involving millions of U.S. dollars, Notarios have to be very careful and will generally take a conservative approach.
The homestead tax exemption is still available to resident taxpayers in Mexico, and it is the Notario who decides who meets the requirements of tax residence. To make this determination, Notarios can base their decision on two different sets of laws: Mexican tax laws and Mexican immigration laws.
Since the Mexican Notary (Notario) is jointly responsible for the capital gains tax on real estate if it is due, the notary becomes the tax collector for the government. As a consequence, foreigners are having a hard time getting a tax free exemption. San Miguel sales are a crap shoot with some people getting tax free status and others not. each case is being dealt with on an individual basis. In Mexico City, Foreigners are routinely granted tax free status. In most other places foreigners are being taxed on the sale of their Mexican home.
1. However, if you are a Mexican National and this is/was your family home, it should be tax free.
2. If you have a green card, you are taxable on your world income and the sale of a Mexican, Canadian, Australian or Ethiopian home/house is reportable and maybe taxable. However, again, if it is the only home you own and you have physically occupied it for 24 out of the 60 months before sale, you are eligible for up to $250,000 per owner tax free on your US 1040.
Another factor is to 'top up' the value of the home on the day you actually immigrated to the USA.
So the money is not taxable when you take it to the USA to buy your home there but the Mexican sale itself may be taxable in both Mexico and the United states. �
CEN-TA Cross Border Services - Tax, Visas, Immigration