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lhpdiver

Sep 30, 2013, 1:25 PM

Post #1 of 10 (262 views)

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Taxes on Pagares and Inversiones ?

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Are we expected to pay US taxes on interest earned by bank investments here in Mexico ? These things are already taxed in Mexico.

mcm

Sep 30, 2013, 2:58 PM

Post #2 of 10 (238 views)

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Re: [lhpdiver] Taxes on Pagares and Inversiones ?

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Short answer: no. As long as you are paying taxes in Mexico (these are typically deducted by the investment company or bank). this is, I think, because the US has a reciprocal tax agreement with Mexico.
You are supposed to declare that you have foreign accounts (if the total amount is over 10,0000USD) when you file your 1040 for US taxes, and submit a separate form with the account(s) details.
If you're still unsure, you can go to the IRS website and type in your question to their search engine, and be directed to the relevant information.

stevebrtx

Sep 30, 2013, 3:42 PM

Post #3 of 10 (224 views)

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Re: [mcm] Taxes on Pagares and Inversiones ?

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Seems like the IRS only "asks" if you have a foreign acct, the $10K comes in with the FBAR which is sent to the Treasury Dept by June 15th, a completely separate agency whom I'm sure never ever shares info with the IRS? And we may be treated to FATCA by mid '14 if they don't delay it again, that one is causing heartburn around the world.
http://www.chapalaweather.net

lhpdiver

Sep 30, 2013, 4:41 PM

Post #4 of 10 (211 views)

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Taxes on Pagares and Inversiones ?

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Assuming you want to be totally above board. You anticipate buying a house in Mexico and bring in some dollars (which you convert to pesos at a hefty cost). You bring in say $100K and put it in a pagare which earns 3.6% and they withhold .6% tax here. Does the US think they are due something on your interest ?

chicois8

Sep 30, 2013, 5:05 PM

Post #5 of 10 (206 views)

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Re: [lhpdiver] Taxes on Pagares and Inversiones ?

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In Reply To
Assuming you want to be totally above board. You anticipate buying a house in Mexico and bring in some dollars (which you convert to pesos at a hefty cost). You bring in say $100K and put it in a pagare which earns 3.6% and they withhold .6% tax here. Does the US think they are due something on your interest ?


would you call it earned income?

stevebrtx

Sep 30, 2013, 7:07 PM

Post #6 of 10 (188 views)

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Re: [chicois8] Taxes on Pagares and Inversiones ?

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The question isn't what "we" call it, the question is what the IRS calls it.
http://www.chapalaweather.net

chicois8

Oct 1, 2013, 8:17 AM

Post #7 of 10 (139 views)

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Re: [stevebrtx] Taxes on Pagares and Inversiones ?

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The question isn't what "we" call it, the question is what the IRS calls it.

Well since I have to report interest in the earned income section I guess that is what the IRS calls it.........

YucaLandia


Oct 1, 2013, 10:10 AM

Post #8 of 10 (113 views)

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Re: [lhpdiver] Taxes on Pagares and Inversiones ?

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Assuming you want to be totally above board. You anticipate buying a house in Mexico and bring in some dollars (which you convert to pesos at a hefty cost). You bring in say $100K and put it in a pagare which earns 3.6% and they withhold .6% tax here. Does the US think they are due something on your interest ?

In crude terms, the tax treaty between the USA and Mexico does not allow double taxation. Taxes paid in the USA on an item are credited against any Mexican taxes owed, and taxes paid in Mexico are credited against any US taxes owed. There are many cases where Americans owe no taxes, due to living abroad. If you earned less than the minimum amounts, then you do not need to file with the IRS:

"Your income, filing status, and age generally determine whether you must file an income tax return. Generally, you must file a return for 2012 if your gross income from worldwide sources is at least the amount shown for your filing status in the following table.

Filing Status* Amount
Single $9,750 ~ 65 or older $11,200
Head of household $12,500 ~ 65 or older $13,950
Qualifying widow(er) $15,700 ~ 65 or older $16,850
Married filing jointly $19,500
Not living with spouse at end of year $3,800
One spouse 65 or older $20,650
Both spouses 65 or older $21,800
Married filing separately $3,800

http://www.irs.gov/...ations/p54/ch01.html

Further Details: American citizens who can meet the "proof of physical presence test" of being in the US no more than 35 days per tax year, or if you can prove that you are "a bona fide resident" of a foreign country, then you can claim the annual Foreign Earned Income Exemption of $97,600 for 2013.

http://www.irs.gov/...ned-Income-Exclusion

As a result of these rules, I doubt that most American citizens living in Mexico owe taxes on interest earned on Mexican accounts.

Happy trails
-
Read-on MacDuff
E-visit at http://yucalandia.com

(This post was edited by YucaLandia on Oct 1, 2013, 10:13 AM)

lhpdiver

Oct 1, 2013, 10:37 AM

Post #9 of 10 (98 views)

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Re: [YucaLandia] Taxes on Pagares and Inversiones ?

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I've been reading up on the Foreign Income Exclusion and I think I like what I am reading. It is not clear to me if this is a 'gift' from the IRS or if the intent is that those earning be reported to Mexico (regardless of what most expats choose to do). I did find it interesting that the monies earned can be sitting in the US...

Back to my original question for a moment. Let's say you have $110K in foreign income (non-passive). Are you still expected to report your, say, $5K passive, already taxed in Mexico, interest on some IRS form ?

And if you can humor me for a moment;
- does the US allow for recoup of closing costs on a home purchased in Mexico (primary/only residence) ?
- can you write off/depreciate use of a home office in that house ?
- can renters recoup something for a home office ?


I know, I know - consult a tax professional. I'm just preparing for that conversation (assuming I can find someone to converse with).

addtocart

Oct 1, 2013, 10:56 AM

Post #10 of 10 (90 views)

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Re: [YucaLandia] Taxes on Pagares and Inversiones ?

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If you earned less than the minimum amounts, then you do not need to file with the IRS:

"Your income, filing status, and age generally determine whether you must file an income tax return. Generally, you must file a return for 2012 if your gross income from worldwide sources is at least the amount shown for your filing status in the following table.

Filing Status* Amount
Single $9,750 ~ 65 or older $11,200
Head of household $12,500 ~ 65 or older $13,950
Qualifying widow(er) $15,700 ~ 65 or older $16,850
Married filing jointly $19,500
Not living with spouse at end of year $3,800
One spouse 65 or older $20,650
Both spouses 65 or older $21,800
Married filing separately $3,800

http://www.irs.gov/...ations/p54/ch01.html
Technically true, but it leaves a big hole in your filing history. If you find yourself with taxable income in later years, after not filing for a few years, you will have explain, and explain good, just why you failed to file in those missing years.

File every year no matter what your income. Use the short form, 1040A I think, and it's free at many places including Turbo Tax and the IRS web site.
 
 
 
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