Capital Gains

When a homeowner sells his or her primary residence in Mexico, considered that the seller has legal status, that is, individuals who have a temporary or permanent visa who have not sold their primary residence within the past 3 years, in this case, the seller may qualify for a tax exemption, for capital gains purposes, that is, up to 700,000 UDI, per homeowner.

What is a UDI? The UDI is a factor used for loans and mortgages. It’s value fluctuates based on the rate of inflation and is published during business days by the Federal Journal (Periodico Oficial de la Federacion).

Qualify for a tax exemption for capital gains. The Income Tax Law (article 93, section XIX, ISR ) allows a resident homeowner (meaning that you must have a temporary or permanent resident visa or be a naturalized Mexican citizen) a savings of up to 700,000 (per homeowner).Impact of the UDI as of August 08, 2021. Exchange Rate: $20.01 (subject to change due to fluctuation).Savings: 700,000 Udis.Value of the Udi: 6.616729 pesos. Multiplying 700,000 udis by 6.810806 results in $4,631,710 pesos. Divide $4,631,710 pesos by $20.01 pesos: $231,469 dollars. Potential capital gains savings as of August 08, 2021, $231,469 dollars.

Again, this exemption applies only to homeowners with legal status, that is, individuals who have a temporary or permanent visa. In June of 2021 the potential capital gains savings were $238,259 dollars, a difference of $6,789 dollars due to the exchange rate. This tax exemption is limited to homeowners thus it does not apply to vacant lots nor to corporations. Before you buy or sell a condominium or a home in Mexico, make sure to invest in the right advice and not forfeit a sizable chunk of the gain for listening to unreliable sources.

By Rafael Solorzano of Baja Legal Advice

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