Mexico Living – Can You Save on Taxes?

Mar 19, 2012   //   by admin   //   Living in Mexico, Mexico Living, Mexico Living Now  //  No Comments
Mexico Living

Mexico Living - What Are the Benefits?

Mexico Living – Know Your Tax Laws

Many citizens of the U.S. who are  Mexico living as permanent residents and working in Mexico are entitled to a 2011 foreign income exclusion up to $92,900 in earnings.  This does not include income gained from interest, dividends, social security and capital gains.

Another benefit of Mexico living is that, as a permanent resident in Mexico, you’re entitled to a federal filing extension through June 15, 2012.  However, make sure to attach the correct form indicating you are a resident alien or military personnel with a permanent residence in Mexico to qualify for the extension.

As an American who is Mexico living, you must know about the laws for “world-wide income”.  The federal law for world-wide income includes income from foreign trusts as well as bank and security accounts.  These are taxable incomes.

The United States has tax treaties with 42 countries, and Mexico is one of them.  While you are Mexico living, you need to know the specifics of the U.S. tax treaty with Mexico as it dictates that Mexico can share your financial information with the United States.

For complete information on the U.S. Mexico tax treaty,visit www.irs.gov/pub/irs-trty/mexico.pdf

Estate or Inheritance Tax – Mexico Living

Unlike the U.S. estate and inheritance tax which is at some 40%, Mexico does not impose this tax.  The only fees to those that inherit your Mexico owned estate or property are closing costs and title transfer and  registration of same in name of the beneficiary after the death of the owner.  Simply, if you are the property owner or you have a family member who is bequeathing you property and estate in Mexico, make certain all wishes are documented in a final Mexican will and prepared by a qualified Mexican Notario.   If you do not speak Spanish, make certain your Mexican will is created with the assistance of a translator so that you know your specific wishes are detailed exactly as you wish and according to state regulations.

Without a proper Mexican will, it is possible that your spouse and children will end up with only 50% of your property and have to go through all sorts of processes to claim the other 50% you “thought” was automatically theirs as your beneficiaries.  Each Mexican state has different laws on beneficiaries, so know the inheritance and estate laws in the state in which you are Mexico living.

Mexico Living – Credits & Deductions

Part of the benefit of Mexico living is that if you are paying foreign taxes in Mexico on property, rental income, social security for your own business or your employees, etc., much of this can be used towards your U.S. tax deductions as credits.  The U.S. Mexico tax treaty is also to protect you from paying two countries while living and working permanently in one.

Be Alert to Changing Tax Regulations for Mexico Living

If you want to continue to live well in Mexico and enjoy your time without worry, it’s best to know all of the tax laws before you purchase a house or property, open a business or invest in Mexican markets.

The IRS has recently announced they will take away passports of people who evade their tax responsibilities to the U.S.

Remain diligent and keep yourself aware of the tax laws that can affect you or your business while you are happily enjoying the care free style of Mexico living.

We at Mexico Living Now hope you find our information helpful and we look forward to your feedback or questions if it pertains specifically to Mexico living.

 

 

 

 

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