Capital-gains tax (ISR) when you sell — and how to legally reduce it
The exit tax most buyers don't plan for: how it's calculated, the primary-home exemption's real conditions, and why the paperwork you keep today decides your bill later.
General education, not legal or tax advice. Requirements vary by state, municipality, notario, SAT office, and year — confirm current specifics with your Notario Público, an attorney, and a cross-border accountant before acting.
Why buyers ask
Buyers concentrate on getting in and forget the exit. Capital-gains tax on the sale can be substantial, the primary-home exemption is narrower than people assume, and the deductions that shrink the bill depend on records you have to start keeping the day you buy.
When you sell, the seller pays income tax (ISR) on the gain, and the notario calculates and withholds it at closing — you don't file it separately. There are two routes: graduated rates up to about 35% on the net gain after allowable deductions, or 25% of the gross sale price with none. The notario computes both. Deductions — your inflation-adjusted purchase price, improvements documented with facturas, notario fees, and commissions — can sharply lower the net-gain figure. A primary-residence exemption can eliminate the tax up to roughly 700,000 UDIS (about 4.5M pesos), but it is for Mexican tax residents who can prove they lived there and who file — most non-resident foreign owners don't qualify.
Who pays, and when
The seller owes ISR on the gain; the buyer is not part of this bill. The notario calculates, withholds, and remits it at closing, so it comes out of your sale proceeds — not from a separate return you file later. Always ask for the written calculation before you sign anything.
The two calculation methods
- Graduated rates up to ~35% on the net gain — the sale price minus your inflation-indexed cost basis and allowable deductions.
- 25% of the gross sale price — a flat rate with no deductions.
The notario runs both; which is cheaper depends on how much documented cost you can prove.
What reduces the gain
- Your original purchase price, adjusted for inflation over the years you held it.
- Capital improvements — but only those documented with official facturas (CFDI); undocumented work doesn't count, and improvements are depreciated for this purpose.
- Notario fees and acquisition costs from when you bought.
- The real-estate commission on the sale, with supporting documentation.
This is exactly why keeping every factura — from the purchase closing through every renovation — is not optional if you care about your eventual tax.
The primary-residence exemption — and its fine print
A resident selling their home can exempt the gain up to about 700,000 UDIS (~4.5M pesos, indexed). But it requires that you are a Mexican tax resident with an RFC/CURP; that you can prove the home was your residence (voter ID, utility bills, or bank statements in your name at the address); that you file the annual return; and it can generally be used only once every three years. A non-resident using the property as a vacation home cannot claim it.
Selling as a non-resident
Without the exemption, you're taxed under one of the two methods above — which is precisely why the deduction paperwork becomes your main lever to bring the bill down.
- "It's my home, so the sale is tax-free." The exemption is for Mexican tax residents who meet strict proof and filing conditions — not automatic for any owner.
- "I'll deduct the renovations I paid for in cash." Only improvements with official facturas count; cash-and-handshake work is invisible to SAT.
- "I file the capital-gains tax myself after the sale." The notario withholds it at closing — you must plan for it before you sign.
- "Under-stating the sale price will cut my tax." It's illegal, the appraisal and notario constrain it, and it raises the next owner's future gain.
Practical implications
- From day one, keep every factura — purchase, closing, and every improvement — in your name/RFC.
- Get the notario's written ISR calculation before signing the sale.
- If you intend the home as a primary residence and want the exemption, get residency + RFC in order well ahead of selling.
- Model both methods; the net-gain route only wins if you can document your costs.
Reality Check
Puerto Vallarta · Riviera NayaritFederal law
ISR, the primary-residence exemption, the UDIS cap, and the CFDI/factura rules are federal (SAT) and uniform nationwide. What varies locally is which notario and state registry process the sale.
Jalisco considerations
A Puerto Vallarta sale is closed and withheld by a Jalisco notario; the deductible acquisition costs trace back to your original Jalisco closing.
Nayarit considerations
A Riviera Nayarit sale runs through a Nayarit notario; the tax itself is federal, but confirm your basis documents match the Nayarit registry record for the property.
Puerto Vallarta / Riviera Nayarit reality check
The bay's foreign owners are disproportionately non-residents holding second homes, so most won't get the primary-home exemption — which makes documented deductions the real tool. High foreign turnover also means local notario offices handle ISR withholding for foreigners routinely.
Practical local implications
Keep facturas from purchase onward, get the written calculation before signing, and don't assume the exemption applies unless you're a filing Mexican tax resident who can prove you lived at the property.
Related
Why might I need a Mexican tax ID (RFC) in hand at closing?
The Mexican tax ID, the e-invoicing system behind it, and why timing matters.
Beyond the sale price, what will closing actually cost me — and which costs are the buyer's versus the seller's?
The buyer's side of the ledger: acquisition tax, notario fees, the trust, and the registry — usually 4%–8% on top of the price.
Questions about your situation? Speak with an advisor.