Moving to Mexico as an American expat sounds like a dream – sunny beaches, vibrant culture, and affordable living. But let’s be real: taxes don’t disappear just because you’ve swapped snow for salsa. If you’re a US citizen or green card holder, Uncle Sam still expects you to file, no matter where you live. And now, Mexico’s tax system comes into play too.
I’ve talked to expats who’ve made the move, and one thing’s clear: tax confusion is real. Missing a deadline, forgetting a form, or misunderstanding a treaty benefit could result in penalties. But don’t worry – this guide breaks it down in plain English.
US Taxes for Expats in Mexico: The Basics
1. Yes, You Still Have to File US Taxes
Even if you’re sipping margaritas in Playa del Carmen, the IRS hasn’t forgotten about you. As a US citizen or permanent resident, you’re required to report your worldwide income, including:
- Salary from a Mexican employer
- Freelance or remote work income
- Rental income from property back in the States
- Investment earnings
Key Forms You’ll Need:
- Form 1040 – Your standard US tax return
- FBAR (FinCEN Form 114) – If you have over $10,000 in foreign bank accounts at any point in the year
- Form 8938 (FATCA) – If your foreign assets exceed certain thresholds (varies by filing status)
2. Mexico’s Tax Rules for Expats
Mexico has a tax system, and depending on your residency status, you could also owe taxes here.
Are You a Mexican Tax Resident?
You likely are if:
- You spend more than 183 days in Mexico in a year
- Your “center of vital interests” (home, family, job) is in Mexico
If you’re a tax resident, Mexico taxes your worldwide income. Non-residents only pay tax on Mexican-sourced income.
Important Mexican Tax Deadlines:
- April 30 – Annual tax return due (Declaración Anual)
- Monthly VAT (IVA) filings – If you run a business in Mexico
How to Avoid Double Taxation
The good news? The US-Mexico Tax Treaty helps prevent you from being taxed twice on the same income. Here’s how to use it:
Option 1: Foreign Earned Income Exclusion (FEIE)
- Excludes up to $120,000 (2023 limit) of foreign-earned income from US taxes
- Must pass either the Physical Presence Test (330+ days abroad) or the Bona Fide Residence Test
Option 2: Foreign Tax Credit (FTC)
- Let’s you claim a credit for taxes paid to Mexico
- Useful if your Mexican tax rate is higher than the US rate
Social Security & Medicare
If employed in Mexico, the US-Mexico Totalization Agreement helps avoid double Social Security taxes.
Familiar Tax Mistakes Expats Make (And How to Avoid Them)
1. Forgetting the FBAR
If you have $10,000+ in foreign accounts, you must file an FBAR. Penalties can be $10,000+ per violation—don’t risk it!
2. Missing the June 15 Extension
US expats get an automatic extension to June 15, but if you owe taxes, interest starts accruing after April 15.
3. Not Reporting Mexican Rental Income
Renting out a condo in Cancún? Both the US and Mexico may want a piece. Deduct expenses to lower your bill.
How Eric M Hunt Can Help
Let’s face it—taxes in two countries are complicated. That’s where Eric M Hunt comes in. They specialize in:
✅ US & Mexico tax filings – No more guessing which forms you need
✅ FBAR & FATCA compliance – Avoid nasty penalties for missed filings
✅ Tax planning strategies – Maximize FEIE, FTC, and treaty benefits
FAQs
1. Do I have to file US taxes if I live full-time in Mexico?
Yes. The US taxes citizens and green card holders on worldwide income, no matter where you live.
2. Can I avoid paying taxes in both countries?
Yes, using the FEIE or FTC. The tax treaty helps prevent double taxation.
3. What happens if I don’t file the FBAR?
Big penalties – up to $10,000 or more per violation. It’s not worth the risk.
4. When are US expat tax deadlines?
- April 15 – Taxes owed are due (even if you file later)
- June 15 – Automatic extension for expats
- October 15 – Additional extension if requested
5. Does Eric M Hunt handle Mexican tax filings, too?
Yes! They help with both US and Mexican tax compliance.
Final Thoughts: Don’t Let Taxes Ruin Your Expat Dream
Mexico offers an incredible lifestyle, but tax mistakes can turn paradise into a paperwork nightmare. Stay compliant, take advantage of tax breaks, and Eric M Hunt can handle the heavy lifting if you’re feeling overwhelmed.
Now enjoy those tacos – you’ve earned them! 🌮🇲🇽
