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zoeq1000

Sep 25, 2005, 9:17 AM

Post #1 of 8 (743 views)

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Question for homeowners in Mexico

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Hi, I'm wondering about the 25% tax one must pay when they sell a house in Mexico. We are remodeling at some expense and thought we could take it off the selling price if we sell. Our architect informs us that HE is the one paying all the taxes on the remodeling so it will not come off the selling price of the house UNLESS we buy an invoice from him for the cost of 15% of the total price of remodeling. Do architects in Mexico generally not charge the customer taxes in their estimates? This is an all-new way of doing things for me. Any ideas?

latitude26

Sep 25, 2005, 3:06 PM

Post #2 of 8 (709 views)

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Re: [zoeq1000] Question for homeowners in Mexico

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Here is a very informative article about home building and being able to claim the expense against your captial gains taxes when you sell. But I'm not sure if this information varies from state to state with regards to the process of "manifesting" your construction. We are in the same state as the guy who wrote the article and it's been very helpful for us.

http://www.experienceloscabos.com/construct.html

gpk

Sep 25, 2005, 5:01 PM

Post #3 of 8 (681 views)

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Re: [zoeq1000] Question for homeowners in Mexico

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Note: This is not legal advice.

As I understand it, a service or product provider must declare the income from any purchase/fee for which a factura (offical receipt) is given. I think your architect must pay the IVA tax of 15% (the value added sales tax) on any amounts so declared, so if you want a factura from him, you must pay this 15% IVA.

Also as I understand it (and this type of thing can change from area to area and from time to time), if you have an FM3 (or better) visa and the home is your residence (as listed on your visa) in Mexico for at 6 months immediately prior to the sale (supported by comprombantes and a letter testifying to such) there is no tax on the sale of houses (bare land is not covered--and there is some new talk that the "extra" land a homeowner has may be subject to tax).

Basically, if you are concerned (and we all should be) consult a notario in your area right now--doing so after the fact will be of no help.

zoeq1000

Sep 25, 2005, 7:12 PM

Post #4 of 8 (646 views)

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Re: [gpk] Question for homeowners in Mexico

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Thanks a lot for both of your input. We do have a good notario and we will ask him. I am encouraged to think there is a possibility that if I do live in the house there won't be the 25% tax. And I also feel encouraged that our architect is most likely giving us good info. He has been very good so far. Thanks for the push to go to the notario.

ncferret

Sep 26, 2005, 7:10 AM

Post #5 of 8 (580 views)

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Re: [zoeq1000] Question for homeowners in Mexico

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Even if you are exempt from capital gains taxes in Mexico, you may not be exempt in your country of origin. For example, if you are a US citizen and sold your principal residence in Mexico after 1 year and paid no taxes in Mexico, you would almost certainly owe capital gains in the US. Of course, in the US your expenses would be deductible against the gain.

Don't just check with the Notario, check with your accountant in the US or Cananda or wherever you are a citizen.

gpk

Sep 26, 2005, 7:33 AM

Post #6 of 8 (571 views)

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Re: [ncferret] Question for homeowners in Mexico

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Sales in Mexico are not reported to the IRS.

jerezano

Sep 26, 2005, 7:39 AM

Post #7 of 8 (563 views)

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Re: [gpk] Question for homeowners in Mexico

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Hello,
Quote--Sales in Mexico are not reported to the US--End quote.

But that has nothing to do with your income tax. Just because a 1099 is not filed with the IRS is not a sign that you, yourself do not need to report that income. Check with your accountant.

Adios. jerezano.

zoeq1000

Sep 26, 2005, 7:59 AM

Post #8 of 8 (553 views)

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Re: [ncferret] Question for homeowners in Mexico

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OK. Good point about US taxes.