Selling Property in Mexico: What to Know About ISR Before You Set a Price

Many sellers learn about ISR only after accepting an offer. Understanding it in advance helps you price your property with confidence and plan your net proceeds.

What Is ISR?

ISR (Impuesto Sobre la Renta) is Mexico’s income tax. In a property sale, it works as a capital gains tax: it applies to the profit you earn, not to the full sale price.

The seller is responsible for paying it. Your notary calculates the amount, withholds it at closing, and pays it directly to the SAT on your behalf.

Tax Residency Matters More Than Your Visa

Holding a resident card does not automatically make you a Mexican tax resident. For that, you need an RFC and must file taxes in Mexico. Your status determines how you are taxed:

• Mexican tax residents pay a percentage of their net profit and may deduct documented costs.
• Non-residents may choose between a flat 25% of the sale price, with no deductions, or 35% of the net profit, which requires a legal representative in Mexico and complete documentation.

Documents That Reduce Your Taxable Profit

Only expenses supported by an official electronic invoice (CFDI) can be deducted. These include:

• Your original deed
• Renovations and improvements, with invoices for materials and labor
• Closing costs from your purchase
• Your real estate agent’s commission

Please note that cash payments without an invoice cannot be deducted.

Common Mistakes

• Setting a price before calculating the tax
• Not keeping invoices for renovations
• Assuming a visa equals tax residency

Recommendations Before Selling

1. Request an ISR calculation first. Do this before listing the property or accepting an offer, so you know your estimated net proceeds.
2. Organize your documents early. Gather your deed, past notary invoices, and any construction CFDIs. Missing paperwork is a common cause of closing delays.
3. Align your ID with your deed. If you plan to claim the primary residence exemption, make sure your ID or bank statements match the address on the deed.

Know Your Numbers Before You List

Every sale is different. Residency, documentation, and how long you have owned the property all affect the final amount. Schedule an appointment before you set a price.