Buying in Mexico City vs the US: costs and taxes

You can own a Roma or Condesa apartment in your own name, but the day you sell, both the SAT and the IRS want a look at the gain.

The short version

Mexico City sits outside Mexico's restricted zone, so Americans can hold title directly. You need a foreign-ownership agreement with the Ministry of Foreign Affairs (SRE), not a bank trust [1].
The big upfront cost is ISAI, the city's transfer tax. On a MXN 3 million apartment it comes to about MXN 155,000 (about USD 8,300), roughly 5.2% of the price [2].
Mexico exempts the sale of your home if you're a Mexican tax resident and the price stays under 700,000 UDIS [11]. Non-residents pay 25% of the gross price [3][4].
Uncle Sam taxes the gain too. The Section 121 exclusion of USD 250,000 (USD 500,000 joint) can cover a foreign main home, and Mexican income tax on the sale counts toward the foreign tax credit [5][6].
Keeping a Houston house you've left? The exclusion only survives while you still pass the 2-of-5-years test [5].

USD conversions use the Banco de México FIX rate of November 5, 2026 (MXN 18.7147 per USD), rounded.

Can Americans buy in Mexico City?

Yes. Mexico's Constitution keeps foreigners from owning land directly in a strip about 100 km (62 miles) along the land borders and 50 km (31 miles) along the coasts. Inside that zone you buy through a bank trust, the fideicomiso [1]. Mexico City is far from both, so no trust is needed.

Outside the zone, a foreigner signs an agreement with the SRE promising not to ask the US government for diplomatic protection over the property. That's the old Calvo clause idea in practice. You can apply yourself or through a representative with a power of attorney, and in practice your notary handles the paperwork as part of the closing [1].

A few things are different from closing back home:

The notary runs the show. A Mexican notario público is a senior lawyer appointed by the state. They check title, calculate and collect the taxes, and register the deed. There's no title insurance culture like in the States, so the notary's searches matter.
Get your RFC first. You'll want a Mexican tax number (RFC) and a CURP if you have residency. They decide how you're taxed when you sell.
Check the building. After 2017, earthquake history is a real due-diligence item. Ask for the building's structural paperwork and look at our guide to earthquakes in Mexico City.

Getting a loan: Mexican bank or US lender?

Most Americans who buy in Mexico City pay cash. Mexican banks do lend to foreign residents, but they generally want Mexican residency, Mexican-source income and a local credit history, and they price loans in pesos, so compare the rate with what you'd pay in dollars. Expect a bigger down payment than you'd put down stateside.

The alternative is borrowing in dollars against a US home, through a cash-out refinance or a HELOC, and paying cash in Mexico. US lenders won't take a Mexican apartment as collateral, and qualifying from abroad comes with its own hoops. Our guide to US mortgages for Americans living abroad covers them.

If you do take a peso mortgage, watch the currency. The IRS measures your loan in dollars, so if the peso falls while you owe it, paying it off can create a taxable "gain" in US terms even though you repaid exactly what you borrowed. Our guide to currency gains on a foreign mortgage walks through how that trap works.

Costs side by side

Figures as of November 2026. ISAI uses the Mexico City table published in December 2025 for 2026 [2].

Cost	Mexico City	Houston (the US example)
Can you buy?	Yes, direct title with an SRE agreement; no trust needed [1]	Yes, no restrictions on US citizens
Transfer tax	ISAI: progressive, about 5% to 6.5% on most homes; MXN 155,322 (about USD 8,300) on MXN 3,000,000 [2]	Texas has no real estate transfer tax
Notary and registry	Notary fees, appraisal and Public Registry fees on top; get a written quote	Title insurance, escrow and recording fees
Agent fees	Usually paid by the seller	Usually paid by the seller; commission is negotiable
Annual property tax	Predial, based on the cadastral value; low by US standards	No state property tax; local rates add up, and the homestead exemption only covers your main home [7]
Tax on selling your home	Exempt for Mexican tax residents up to 700,000 UDIS of price; non-residents 25% of the gross [3][4]	Federal tax after the Section 121 exclusion; no Texas income tax
US tax on the gain	Yes, worldwide; Section 121 and the foreign tax credit can help [5][6]	Yes; Section 121 if you pass 2 of 5 years [5]

ISAI is charged on the highest of the price, the cadastral value and an appraisal, so a "low declared price" doesn't save you anything [2]. Mexico's Supreme Court found earlier versions of the ISAI table unconstitutional, and the city has reworked it, so ask your notary which table applies on your signing date.

Tax when you sell

The Mexican side

If you're a Mexican tax resident and the apartment is your home, the gain is exempt as long as the sale price is under 700,000 UDIS. UDIS are an inflation-linked unit, so the cap floats; at mid-2026 values it was roughly MXN 6.2 million (about USD 330,000) [4]. Above the cap, only the part of the gain tied to the excess is taxed, and the exemption can't be used more than once in three years [4].

You have to prove residency at the notary's desk: a sworn statement in the deed, your RFC or CURP, and a tax residency certificate or tax ID card [3]. If you can't, the notary treats you as a non-resident and withholds 25% of the total price, not the gain [3]. Non-residents with a legal representative in Mexico can choose to be taxed on the net gain instead, at a higher rate. On a rental or second home, residents pay ordinary income tax on the inflation-adjusted gain, after deducting notary fees, commissions and improvements [4].

The US side

The IRS taxes your worldwide gain, measured in dollars. Three rules matter:

Section 121 works abroad. If you owned and lived in the apartment for 24 of the last 60 months, up to USD 250,000 of gain (USD 500,000 for most joint filers) is tax-free [5]. Nothing in the rules limits it to US homes.
Foreign tax credit. Mexican ISR on the sale is an income tax, so you can claim it on Form 1116 against US tax on the same gain [6]. ISAI and predial aren't income taxes and don't count.
Currency moves count. Your dollar basis uses the rate when you bought, and your dollar proceeds use the rate when you sell. A peso that strengthened can give you a US gain on a sale that broke even in pesos.

Your old Houston house

The 2-of-5-years test is the clock to watch. Once you've been out of the house for more than three years, you've generally lost the exclusion. Depreciation from renting it out after May 6, 1997, is taxed on sale even if the rest of the gain is excluded [8]. Our guide to selling your US home after moving abroad has the timing details.

Renting it out

Mexico. Rental income is taxable in Mexico. Residents can deduct actual expenses or take a standard 35% "blind" deduction, and a company tenant withholds 10% [4]. Non-residents are taxed on gross rent with no deductions. Short-term rentals through platforms come with their own registration and withholding rules, so check them before you count on Airbnb income.

The US side. Report the rent on Schedule E. Because the apartment is used predominantly outside the United States, you must depreciate it under the Alternative Depreciation System over 30 years, not the 27.5 years you'd use for a Houston rental [9][10]. Predial, condo fees and repairs are deductible expenses. Mexican tax on the rent can go on Form 1116.

If you're renting out the house back home instead, our guide to rental income from a US property covers the stateside rules.

Which makes sense for whom

Staying long term, with residency. Buying in Mexico City can make sense. You'll be a Mexican tax resident, the home exemption is in reach, and Section 121 can shelter the US gain if you live there two of the five years before selling.
Retiring in Mexico. Similar logic, but plan for estate issues: a Mexican will for Mexican property, and a US plan for the rest.
Moving back in a few years. Keeping or buying in the States is usually simpler. Transfer tax and notary costs take years to earn back, a non-resident sale costs 25% of the gross price, and a peso swing can wipe out a paper gain.
On a tourist stay. Don't buy until your residency is sorted. Without it, the Mexican side of a sale gets expensive.

A US expat tax preparer (or a lawyer in Mexico) can check your situation before you sign. Want to hear how others closed with a notary? Ask in our community group for Americans in Mexico.

Buying in Mexico City vs back home: what Americans really pay