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Expats in Mexico: Tax Info You Can’t Afford to Miss

Article Summary:

If you are one of the many U.S. expatriates living in Mexico, there are many tax laws in both your home and host country that will affect your expatriate tax preparation. We know that expat tax issues can be confusing so we’ve outlined the seven things you need to know!

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Original Article Text From Greenback Tax Services:

US Expat Living in Mexico? Expatriate Tax Preparation Information You Can’t Miss!

Many Americans head south of the border to Mexico for its warm climate and spicy food. However, if you chose to stay in Mexico for an extended period of time, you’ll want to be sure you know the tax laws for both your host country and your home country. Fortunately, we’ve outlined the 7 things you need to know as an expat living in Mexico.

Income in Mexico is taxed at rates that range from 0 percent to 30 percent. In addition, all expats are required to pay a state tax that ranges from 1 percent to 3 percent.

Individuals who have either a permanent home in Mexico or consider Mexico the location of their “center of vital interests” are considered residents. Center of vital interests is based on having more than 50 percent of worldwide income earned in Mexico and when a core of an individual’s professional activities are in Mexico.

In addition, there is a 183-day exemption period before you are responsible for income taxes in Mexico.

The Mexican tax year spans from January 1st to December 31st. Tax returns must be filed by April 30 of the following tax year.

Taxes in Mexico are also reported monthly and payments must be made on or before the 17th of the following month.

Social security taxes in Mexico range from .25 percent to 20.4 percent. Any Mexican employer with employees on the payroll in Mexico is required to pay these taxes.

In addition to salaries, other sources of income in Mexico are also taxed. Non-cash compensation, such as benefits, is considered taxable. Capital gains, such as shares, property, securities and other assets are also taxed between 25 and 30 percent. Lastly, there is a gift tax on real estate, which must be paid by the recipient.

If you are a US citizen or resident, you will still be required to file US taxes each year. If you have assets in foreign bank accounts, you may be required to report those as well. Specifically, anyone with 10,000 dollars or more in a foreign bank or financial institution during a calendar year will be required to file the FBAR.

Fortunately, there are a few ways you can lower or eliminate your US tax obligations. The first is the Foreign Earned Income Exclusion, which allows you to exclude a certain amount from your foreign earned income on your US expat taxes. The second is the foreign tax credit, which allows you to offset the taxes you paid in your host country with your US expat taxes dollar for dollar. And third is the Foreign Housing Exclusion, which allows an additional exclusion from income on US expat taxes for certain amounts paid for household expenses that occur as a consequence of living abroad.

Link to Original Article:

From Greenback Tax Services

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