Mexico: Worked Example of Tax on Rent

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Tax Example: Rent

Non-resident couple's joint monthly rental income1		US$1,500	US$6,000	US$12,000
Annual Rental Income		18,000	72,000	144,000
Less Standard Costs2		(6,300)	(25,200)	(50,400)
Less Real Estate Tax3		(360)	(1,440)	(2,880)
= Taxable Income		US$11,340	US$45,360	US$90,720
Income Tax Rates4
Up to MXN5,925.84	3%	3%	3%	3%
MXN5,925.85 – MXN50,524.92	10%	10%	10%	10%
MXN50,524.93 – MXN88,793.04	17%	17%	17%	17%
MXN88,793.05 – MXN103,218	25%	–	25%	25%
Over MXN103,218	28%	–	28%	28%
Annual Income Tax Due		US$604.46	US$3,475.67	US$16,217.15
Tax Due as % of Gross Income		3.36%	4.83%	11.26%
Thanks to:

DISCLAIMER:The information contained above is marketing material only and is not written tax advice directed at the particular facts and circumstances of any person and should not be relied upon. We encourage you to discuss your particular situation with us or an independent tax advisor. This information was last updated on August 1, 2007.

Notes

¹ The property is jointly owned by husband and wife, but then taxed separately (50% upon each partner). Exchange rate used: 1 USD = 10.999933 MXN.

² For tax purposes, individuals renting a property have the option to deduct either the standard costs (35% of gross income) or actually incurred income-generating expenses. The deduction of standard costs was utilized in this computation.

³ Residential property tax is calculated as a percentage of the assessed value of the property. The residential (single-unit) rate for Toronto is 0.8528434% for 2007.

⁴ Estimated values. If the deduction of standard costs (also known as “blind deduction”) was taken, no other costs are deductible except for real estate tax.

⁵ Income tax liability is reduced by subsidies.

NON-RESIDENT COUPLE (ELECTING THE 25% FLAT RATE TAX)
Non-resident couple's joint monthly rental income1		US$1,500	US$6,000	US$12,000
Annual Rental Income		18,000	72,000	144,000
Less Cost2		(10,000)	(12,000)	(15,000)
Less Depreciation3		(5,625)	(18,750)	(37,500)
= Taxable Income		US$2,375	US$41,250	US$91,500
Corporate Tax Rate4
Flat Rate	28%	665	11,550	25,620
Annual Income Tax Due		US$665	US$11,550	US$25,620
Tax Due as % of Gross Income		3.69%	16.04%	17.79%
Thanks to:

DISCLAIMER:The information contained above is marketing material only and is not written tax advice directed at the particular facts and circumstances of any person and should not be relied upon. We encourage you to discuss your particular situation with us or an independent tax advisor. This information was last updated on August 1, 2007.

Notes

¹ The property is jointly owned by husband and wife through a local corporation. Exchange rate used: 1 USD = 10.999933 MXN.

² Estimated values. For tax purposes, actually incurred income-generating expenses (maintenance and repairs, management fees, etc.) are deductible against gross income.

³ Estimated values.

⁴ Corporate income tax is levied at a flat rate of 28% for 2007.

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