US Expat Taxes in Mexico
North AmericaIncome Tax Treaty
Yes
Tax System
worldwide
Social Security
No agreement in force
FEIE Qualification in Mexico
Physical Presence Test
Mexico's proximity to the US makes the 330-day physical presence test manageable, but frequent border crossings must be carefully documented. Days spent in the US for business or personal trips count against your 330-day requirement.
Bona Fide Residence Test
Obtaining a Temporary or Permanent Resident Visa strongly supports bona fide residence. Mexican tax registration (RFC number) and local employment further establish residency intent.
Common residence and visa routes
Mexico Tax System
Taxes residents on their worldwide income, regardless of where it is earned.
Tax Rates
Progressive rates from 1.92% to 35%
No U.S.–Mexico Social Security agreement is listed as in force. Confirm which system covers your work.
US-Mexico Tax Treaty
Treaty signed: 1992
Key Provisions:
- Reduced withholding rates on dividends (10% for 10%+ ownership, 15% otherwise)
- Pension income provisions allowing source-country taxation
- Reduced royalty withholding rate of 10%
- Exchange of tax information between authorities
Banking & FBAR in Mexico
Major Banks (MXN)
FBAR Reminder
All Mexican bank accounts with aggregate balances exceeding $10,000 at any point during the year must be reported on FinCEN 114. This includes peso and dollar-denominated accounts, as well as investment accounts at Mexican brokerages.
FATCA Compliance
Mexico signed a Model 1 IGA with the US in 2012. Mexican banks actively report US account holders' information to the SAT, which shares it with the IRS. Expect to provide your SSN or ITIN when opening accounts.
Common Pitfalls for Americans in Mexico
Failing to track border crossings accurately, which can disqualify FEIE physical presence claims
Not registering with the SAT (Mexican tax authority) when required as a tax resident, triggering penalties
Overlooking Mexican tax obligations on worldwide income once you become a Mexican tax resident (183+ days)
Missing the additional June 15 automatic extension deadline and not filing for the October extension
Ignoring state-level payroll taxes (ISN) if employing others or working as a contractor in Mexico
Cost of Living Overview
Monthly Estimate
$1,200-$2,500
vs. U.S.
40-60% lower than US average
Notes
Costs vary significantly by city. Mexico City and tourist areas like Cancun trend higher, while cities like Merida, Oaxaca, and Puebla offer lower costs. Healthcare is notably affordable compared to the US.
FAQ: U.S. Taxes in Mexico
Do I have to pay taxes in both the US and Mexico?
As a US citizen or green card holder, you must file US taxes on worldwide income regardless of where you live. If you become a Mexican tax resident (183+ days), you must also file in Mexico. The US-Mexico tax treaty and Foreign Tax Credit help prevent double taxation on the same income.
Can I use the FEIE while living in Mexico?
Yes. You can qualify via the Physical Presence Test (330 days outside the US in a 12-month period) or the Bona Fide Residence Test. Given Mexico's proximity, carefully track your US visits to maintain FEIE eligibility. The 2025 exclusion amount is $130,000.
Do I need to report my Mexican bank accounts to the US?
Yes. If your aggregate foreign account balances exceed $10,000 at any point during the year, you must file an FBAR (FinCEN 114). Additionally, FATCA Form 8938 may be required if your foreign financial assets exceed $200,000 (filing from abroad). Penalties for non-compliance are severe.
Is there a U.S.-Mexico Social Security totalization agreement in force?
No. The United States and Mexico signed an agreement, but it is not listed by the Social Security Administration among agreements in force. Confirm which system covers your employment or self-employment and whether contributions may be due in both countries.
What is Mexico's RFC and do I need one?
The RFC (Registro Federal de Contribuyentes) is Mexico's taxpayer identification number. If you earn income in Mexico or become a tax resident, you need an RFC. It is required for employment, opening certain bank accounts, and filing Mexican tax returns. You can obtain one at your local SAT office.
Check the current official rules
Use the IRS for U.S. international-filing guidance, Treasury for income-tax treaty documents, and the Social Security Administration for agreements currently in force.