How Mexican Property Taxes Compare to the U.S. and Canada
5 Minute Insights | Published October 28, 2025 | By Connor O.
At a Glance
What You'll Learn: A comprehensive comparison of property tax structures in Mexico versus the U.S. and Canada, including annual property taxes (predial), transfer taxes at purchase, capital gains at sale, and total lifetime tax burden analysis for property owners in the Bajío region.
Best For: Retirees evaluating total ownership costs, investors analyzing after-tax returns, and international buyers wanting to understand the complete tax picture before purchasing Mexican property.
Read Time: 5 Minutes
property taxes represent one of the largest ongoing costs of homeownership. If you're considering purchasing in Mexico's Bajío region, you've probably wondered: will my property taxes be higher or lower than what I currently pay in the U.S. or Canada?
The answer surprises many buyers. Mexican property taxes—particularly the annual predial that functions like U.S./Canadian property tax—typically run 70-90% lower than comparable U.S. properties and 60-85% lower than Canadian equivalents. For a $400,000 property in San Miguel de Allende, you might pay $600-1,200 annually versus $4,000-8,000 in many U.S. jurisdictions or $3,500-6,000 in Canada.
However, the complete tax picture includes transfer taxes at purchase, capital gains at sale, and the absence of certain tax benefits available in your home country. Understanding the full equation helps you accurately project the real cost of Mexican property ownership over time.
Annual Property Tax: Predial in Mexico
The most direct comparison involves annual property taxes—called predial in Mexico—that property owners pay to their local municipality regardless of whether they occupy the property.
How Predial Works
Predial is calculated as a percentage of the property's assessed value (valor catastral), which typically runs 50-70% of market value. Tax rates vary by municipality but generally range from 0.1% to 0.3% of assessed value annually—dramatically lower than most U.S. and Canadian jurisdictions
Assessment values update infrequently in many Mexican municipalities, sometimes remaining static for 5-10 years unless triggered by sale or major renovation. This creates additional tax savings as market values rise faster than assessed values, widening the gap between what you'd pay on comparable properties in the U.S. or Canada.
Payment is typically due in the first quarter of the calendar year, with most municipalities offering 10-20% discounts for early payment (usually before end of January). Missing payment deadlines triggers penalties and interest charges, though enforcement is generally less aggressive than in the U.S. or Canada.
The predial system's simplicity—one annual payment, straightforward calculation, minimal bureaucracy—contrasts sharply with complex U.S./Canadian property tax systems involving school districts, special assessments, and multiple taxing authorities. This simplicity translates to lower administrative costs and more predictable budgeting for property owners.
Comparing Annual Property Tax Rates: Real Examples
Concrete examples illustrate the meaningful difference between Mexican predial and U.S./Canadian property taxes.
$400,000 Property Comparison
Location | Market Value | Assessed Value
| Annual Tax Rate | Annual Tax | Effective Rate |
|---|---|---|---|---|---|
San Miguel de Allende, MX | $400,000 | $240,000 (60%) | 0.2% | $480 | 0.12% |
Austin, Texas | $400,000 | $400,000 (100%) | 2.1% | $8,400 | 2.1% |
San Diego, California | $400,000 | $400,000 (100%) | 1.1% | $4,400 | 1.1% |
Toronto, Ontario | $400,000 | $400,000 (100%) | 0.7% | $2,800 | 0.7% |
Vancouver, BC | $400,000 | $400,000 (100%) | 0.25% | $1,000 | 0.25% |
$250,000 Property Comparison
Location | Market Value | Assessed Value
| Annual Tax Rate | Annual Tax | Effective Rate |
|---|---|---|---|---|---|
Querétaro, MX | $250,000 | $150,000 (60%) | 0.15% | $225 | 0.09% |
Phoenix, Arizona | $250,000 | $250,000 (100%) | 1.3% | $3,250 | 1.3% |
Denver, Colorado | $250,000 | $250,000 (100%) | 0.5% | $1,250 | 0.5% |
Calgary, Alberta | $250,000 | $250,000 (100%) | 0.7% | $1,750 | 0.7% |
Montreal, Quebec | $250,000 | $250,000 (100%) | 1.2% | $3,000 | 1.2% |
These comparisons show Mexican property taxes running at roughly 10-20% of what owners pay in many U.S. markets and 15-30% of Canadian rates—representing thousands in annual savings.
According to the Tax Foundation, U.S. property tax rates vary dramatically by state and locality, with some jurisdictions exceeding 2.5% annually while others fall below 0.3%, though most populated areas cluster in the 1-2% range.
Mexican property taxes don't fund public schools the way U.S./Canadian property taxes do. Mexico funds education through federal and state budgets rather than local property taxes, partially explaining the lower rates. Services like garbage collection, street maintenance, and local administration receive predial funding, but at different service levels than many U.S./Canadian municipalities provide.
Property Transfer Tax: One-Time Costs at Purchase
Beyond annual taxes, property purchases in Mexico trigger transfer taxes—one-time costs that differ from U.S./Canadian transfer tax structures.
Mexican Transfer Tax (Impuesto Sobre Adquisición de Bienes Inmuebles)
Most Mexican states charge 2-4% of the property's assessed value as transfer tax at purchase. In Guanajuato state (including San Miguel de Allende and Dolores Hidalgo), the rate is approximately 2%. Querétaro charges roughly 3%.
Because transfer tax applies to assessed value rather than purchase price, and assessed values run 50-70% of market value, the effective rate on purchase price is typically 1-2.5%—considerably lower than the nominal rate suggests.
Transfer tax is typically paid by the buyer and is included in closing costs, making it a one-time expense rather than ongoing obligation.
U.S. and Canadian Transfer Taxes
United States - Transfer taxes vary dramatically by state and locality. Some states (like Texas and Arizona) have no transfer tax. Others charge 0.5-2% at state level, with some cities adding additional local transfer taxes. New York City, for example, can see total transfer taxes exceeding 4% on high-value properties.
Canada - Most provinces charge land transfer tax at purchase, with rates typically 0.5-2% on a sliding scale based on purchase price. Some cities (Toronto, for example) add municipal land transfer tax on top of provincial rates, potentially reaching 3-4% combined.
Comparative Transfer Tax Example: $400,000 Purchase
- San Miguel de Allende: ~$6,000 (1.5% effective rate)
- Austin, Texas: $0 (no state or local transfer tax)
- San Diego, California: $4,400 (1.1% county transfer tax)
- Toronto, Ontario: ~$12,000 (3% combinead provincial and municipal)
- Vancouver, BC: ~$6,000 (1.5% provincial property transfer tax)
Capital Gains Tax: Selling Your Property
When you eventually sell your Mexican property, capital gains tax (ISR) applies to profits—similar to U.S./Canadian systems but with important differences.
Mexican Capital Gains Tax Structure
Mexico charges capital gains tax on the profit from property sales at rates up to 35% on gains, though exemptions and deductions significantly reduce most taxpayers' effective rates.
Key Exemptions:
- Primary residence exemption if you've lived in the property for at least 2 consecutive years (up to ~$150,000 USD in gains exempt)
- Deductions for improvements, closing costs, and inflation adjustments reduce taxable gain
- Original purchase costs and expenses are deductible
Calculation Method: Taxable gain = Sale price - (Purchase price + improvements + costs + inflation adjustment)
The inflation adjustment can substantially reduce taxable gains on properties held for many years, as Mexico adjusts the cost basis upward based on official inflation rates.
U.S. Capital Gains Tax on Foreign Property
U.S. citizens must report worldwide income, including gains from Mexican property sales, on their U.S. tax returns.
U.S. Tax Treatment:
- Long-term capital gains rates of 0%, 15%, or 20% depending on income
- Primary residence exclusion ($250,000 single / $500,000 married) available if property qualifies as your primary home
- Foreign tax credit available for Mexican capital gains taxes paid, reducing double taxation
- FIRPTA withholding doesn't apply (only affects foreign nationals selling U.S. property)
Canadian Capital Gains Tax on Foreign Property
Canadian residents must also report worldwide income including gains from Mexican properties.
Canadian Tax Treatment:
- 50% of capital gains included in taxable income at your marginal rate
- Principal residence exemption available if property qualifies
- Foreign tax credit for Mexican taxes paid to reduce double taxation
- Recent 2024 changes increased inclusion rate to 66.7% for gains exceeding $250,000 annually
Comparative Capital Gains: $100,000 Profit Scenario
Assuming a property held 5+ years with $100,000 profit after all deductions and adjustments:
Scenario | Mexican Tax | Home Country Tax
| Foreign Tax Credit | Total Tax | Effective Rate |
|---|---|---|---|---|---|
U.S. Citizen | ~$20,000 | $15,000 (15% rate) | -$15,000 credit | $20,000 | 20% |
Canadian Resident | ~$20,000 | $18,000 (50% inclusion) | -$18,000 credit | $20,000 | 20% |
Denver, Colorado | $0 (exempt) | $0 (exclusion applies) | N/A | $0 | 0% |
Calgary, Alberta | $0 (exempt) | $0 (exemption applies) | N/A | 0% | 0% |
Tax Benefits You Lose (and Gain) in Mexico
Moving from U.S./Canadian property to Mexican property involves both losing certain tax advantages and gaining others.
Tax Benefits Lost
- U.S. Mortgage Interest Deduction - U.S. taxpayers can deduct mortgage interest on primary and sometimes secondary residences. Mexican property mortgage interest isn't deductible for U.S. citizens unless it's your primary residence and meets specific criteria.
- Property Tax Deductions - U.S. taxpayers can deduct up to $10,000 in state and local taxes (SALT) including property taxes. Mexican predial paid on non-primary residences isn't deductible on U.S. returns.
- Canadian Property Tax Credits - Some Canadian provinces offer property tax credits or grants for primary residences, which don't apply to foreign property.
Tax Benefits Gained
- Lower Absolute Tax Burden - Even without deductions, paying $500 annually versus $5,000 creates more cash flow than deducting $5,000 from taxable income saves (typically $1,000-1,500 depending on tax bracket).
- Wealth Tax Avoidance - Mexico doesn't impose wealth or net worth taxes on real property, unlike some U.S. states considering such measures.
- Estate Tax Efficiency - Mexican property held in fideicomiso can simplify estate transfer for heirs compared to complex U.S. probate processes, though both countries have estate tax considerations.
Lifetime Tax Burden: 20-Year Ownership Comparison
Looking at total taxes over a typical ownership period reveals the cumulative advantage of lower Mexican property taxes.
$350,000 Property - 20 Year Analysis
San Miguel de Allende Property:
- Annual predial: $550 × 20 years = $11,000
- Transfer tax at purchase: $5,250
- Capital gains tax at sale (assumed $100k gain): $20,000
- Total 20-year tax burden: $36,250
Austin, Texas Property:
- Annual property tax: $7,350 × 20 years = $147,000
- Transfer tax: $0
- Capital gains tax at sale: $20,000
- Total 20-year tax burden: $167,000
Toronto, Ontario Property:
- Annual property tax: $2,450 × 20 years = $49,000
- Transfer tax at purchase: $10,500
- Capital gains tax at sale: $20,000
- Total 20-year tax burden: $79,500
Net savings over 20 years:
- vs. Austin: $130,750
- vs. Toronto: $43,250
Best Practices for Tax Planning
Maintain detailed expense records - Track all improvement costs, closing costs, and property expenses to maximize deductions when calculating capital gains at eventual sale.
Pay predial early for discounts - Most municipalities offer 10-20% discounts for payment in January or February, making this an easy way to reduce annual costs.
Consult cross-border tax specialists - Work with accountants familiar with both Mexican and U.S./Canadian tax law to optimize your structure and understand reporting requirements.
Ignore home country reporting requirements - U.S. and Canadian citizens must report foreign property ownership and rental income even if no tax is owed due to credits.
Assume primary residence exemptions automatically apply - Both Mexican and U.S./Canadian primary residence exemptions have specific requirements (occupancy duration, timing) that must be met.
Forget about annual FBAR or FATCA reporting - U.S. citizens may need to report foreign financial accounts if property generates rental income deposited in Mexican banks.
Tax Structures Across the Bajío Region
Property tax rates vary slightly across Bajío municipalities, though all remain dramatically lower than U.S./Canadian equivalents.
San Miguel de Allende - Predial rates approximately 0.15-0.25% of assessed value. The historic centro often has slightly higher assessed values than outlying areas, but rates remain consistent across the municipality.
Querétaro - Slightly higher transfer tax (3% vs. 2%) but comparable annual predial rates. The city's status as a major economic center hasn't translated to dramatically higher property taxes.
Guanajuato Capital - Similar rate structure to San Miguel de Allende, with some variations in assessment practices between neighborhoods.
Dolores Hidalgo - Among the region's lowest predial rates, contributing to its attractiveness as an emerging investment market. Lower property values combined with lower rates create very affordable annual tax obligations.
All Bajío municipalities participate in Guanajuato or Querétaro state tax systems, creating consistency in transfer taxes and capital gains treatment regardless of specific town.
Common Questions About Mexican Property Taxes
Yes, if you're a U.S. citizen or Canadian resident, you report worldwide income and property ownership regardless of where it's located. However, foreign tax credits prevent double taxation on the same income or gains. You'll typically pay the higher of the two countries' tax rates, with credit given for taxes paid to the other country.
Unpaid predial accrues penalties and interest (typically 2-4% monthly). Municipalities can place liens on properties with delinquent taxes, and significant arrears can complicate property sales since buyers often require clean tax status. However, enforcement is generally less aggressive than in the U.S./Canada, and payment plans are usually available for catching up on back taxes.
Generally no, unless the Mexican property is your primary residence (which is rare for most U.S./Canadian buyers). Mexican property taxes paid on vacation homes or investment properties aren't deductible under current U.S. and Canadian tax law. The SALT deduction in the U.S. applies only to state and local taxes, not foreign property taxes.
Assessment practices vary by municipality, but many update values infrequently—sometimes only when properties are sold or undergo major permitted renovations. Some municipalities have begun more regular reappraisals (every 3-5 years), but the process remains far less systematic than annual reappraisals common in many U.S./Canadian jurisdictions. This means assessed values often lag market values, keeping predial amounts lower.
Calculate Your Property Tax Savings
See exactly how much you could save annually by owning property in the Bajío versus your current location.
Ready to discuss the complete tax picture for your Mexican property purchase? Schedule a consultation to review your specific tax situation with our network of cross-border tax specialists.