Selling property in Mexico triggers ISR, the income tax on the gain from the sale. ISR is calculated on your actual profit, not the full sale price, and the notary withholds the payment at closing. Understanding what you can deduct and whether the primary-residence exemption applies changes what you walk away with significantly.
What's taxed, and on what basis
ISR taxes the profit from the sale, not the full sale price. That profit is calculated by subtracting the original purchase price, adjusted for inflation per official indices, deductible expenses, and documented improvements from the sale price. The rate for individuals can reach up to 35%, depending on the size of the gain and the seller's specific situation. The notary performs this calculation and withholds the payment at closing, so it pays to gather your documentation well ahead of time.
What you can subtract before the tax is calculated
Mexico's Income Tax Law (Ley del ISR) allows several deductions that reduce the taxable base:
Property appraisals
Invoices for renovations and improvements, issued in the owner's name
Notary and titling fees from the original purchase
Commissions paid to the real estate agency or agent
When you might owe nothing at all
An exemption exists, but every condition has to be met at once: the property must be your primary residence (it does not apply to land or commercial property), the exempt amount is capped at 700,000 UDIS, roughly 5 million pesos depending on the current UDI value, you need to prove the property was actually lived in through utility bills or your voter ID, and you must not have sold another property in the last three years.
Other items worth checking before you sell
Property tax needs to be fully paid before the sale is formalized.
VAT generally does not apply to the sale of a used primary residence, but it can apply to commercial property or non-residential land.
Registration and notary fees are customarily covered by the buyer, though the seller can take these on if negotiated.
The short version
ISR depends on your actual gain, not your sale price. Knowing in advance what you can deduct, and whether the primary-residence exemption applies, changes significantly what you end up walking away with. The notary confirms the final number before you sign.
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