Buying in San Miguel vs the US: costs and taxes

Buying the house is the easy part in San Miguel. The tax bill you set up for the day you sell is what deserves a closer look.

The short version

No bank trust needed. San Miguel de Allende is inland, outside Mexico's restricted zone, so you can hold title in your own name after signing a foreign-ownership agreement with the SRE [1].
The notary does the heavy lifting, collects the local acquisition tax and registers the deed. Get a written cost estimate before you commit.
Mexico taxes the gain unless you're a Mexican tax resident selling your home under the 700,000 UDIS price cap [10]. Non-residents pay 25% of the gross price [2][3].
The IRS taxes the same gain in dollars. Section 121 can exclude up to USD 250,000 (USD 500,000 joint) on a main home anywhere, and Mexican income tax on the sale can be credited [4][5].
A house you've left in Austin keeps its exclusion only while you pass the 2-of-5-years test [4].

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

Can Americans own a house here?

Yes, and directly. Mexico bars foreigners from owning land outright only inside the restricted zone: about 100 km (62 miles) from the land borders and 50 km (31 miles) from the coasts [1]. Buyers in Puerto Vallarta or Cancún use a fideicomiso, a bank trust you renew and pay an annual fee for. San Miguel, in the highlands of Guanajuato, is nowhere near either line.

What you do need is permission from the Ministry of Foreign Affairs (SRE). You agree to treat yourself as a Mexican national for that property and not to call on the US government for protection over it [1]. You can apply yourself or through a representative with a power of attorney, and your notary normally files it as part of the closing.

Some San Miguel quirks that don't come up in a Texas closing:

The historic center is protected. Much of el Centro is a heritage zone, so facade changes and major renovations need approvals. Budget time for permits before you plan that rooftop terrace.
Ejido land is a trap. Some land around town is communal ejido land that can't be sold the normal way. Your notary should confirm the property is private property with clean title at the Public Registry.
Water and power matter. Check the water supply and any well or cistern. Our guide to water, power and internet in San Miguel de Allende lists the questions to ask.

Paying for it

Cash is king in San Miguel. Mexican banks lend mainly to borrowers with Mexican residency and Mexican income, and most retirees living on US pensions and Social Security won't fit the box. Many Americans instead tap equity in a US home through a cash-out refinance or a HELOC, or sell a US home first. US lenders won't take a Mexican house as collateral. Our guide to US mortgages for Americans living abroad explains what qualifying looks like from Mexico.

Borrow in pesos and you add a US tax wrinkle. The IRS measures the debt in dollars, so a falling peso can leave you with a taxable currency gain when you pay the loan off. Our guide to currency gains on a foreign mortgage shows how.

Costs side by side

	San Miguel de Allende	Austin (the US example)
Foreign-buyer rules	Direct title after an SRE agreement; no trust needed outside the restricted zone [1]	None for US citizens
Transfer tax	Municipal acquisition tax, set each year in San Miguel's revenue law, charged on the higher of price and appraisal	Texas has no real estate transfer tax
Closing costs	Notary fee plus VAT, appraisal and registry fees, paid by the buyer	Title insurance, lender and recording fees
Agent commission	Usually paid by the seller	Usually paid by the seller; negotiable
Annual property tax	Predial, a small percentage of the cadastral value, with a discount for paying early in the year	No state property tax; local entities set rates, and the homestead exemption is for your main home only [6]
Tax when you sell your home	Exempt for Mexican tax residents up to 700,000 UDIS of price; non-residents 25% of the gross [2][3]	Federal capital gains tax after Section 121; no Texas income tax
US tax on the gain	Yes, on your worldwide gain [4][5]	Yes [4]

We couldn't confirm San Miguel's 2026 acquisition tax table against the published municipal law, so we don't quote a rate here. Ask the notary to break it out in writing along with their own fee. The real estate agent doesn't set those numbers; the notary does.

When you sell: Mexico first, then the IRS

Mexico

If you're a Mexican tax resident and the house is your home, the sale is exempt up to a price of 700,000 UDIS. The UDI is an inflation-indexed unit, and at mid-2026 values the cap was roughly MXN 6.2 million (about USD 330,000) [3]. That matters in San Miguel, where a renovated colonial home can easily be priced above it. Over the cap, only the share of the gain tied to the excess is taxed, and you can't use the exemption more than once every three years [3].

You prove residency at the closing: a sworn statement in the deed, your RFC or CURP, and a tax residency certificate or a tax ID card [2]. Without it, the notary treats you as a non-resident and withholds 25% of the whole price [2]. A part-time "snowbird" on a tourist permit can get caught here. Non-residents who appoint a legal representative in Mexico can instead pay tax on the net gain at a higher rate.

On a second home or rental, the gain is taxed at ordinary rates after adjusting your cost for inflation and deducting notary fees, commissions and documented improvements [3]. Keep every receipt from the renovation.

The United States

Uncle Sam taxes the gain whether or not Mexico did:

Section 121. Own and live in the house for 24 of the 60 months before the sale and up to USD 250,000 of gain (USD 500,000 for most joint filers) is excluded [4]. The rules don't limit it to US homes.
Foreign tax credit. Mexican ISR on the sale is an income tax, so it can go on Form 1116 against US tax on the same gain [5]. Acquisition tax and predial don't qualify.
Dollars, not pesos. Your US gain uses the exchange rate when you bought and when you sold. A strong peso can create a US gain on a house that sold for what you paid in pesos.

The Austin house you left behind

If you rented out your Austin home after moving south, the clock is running. Once you've been out more than three years, you generally fail the 2-of-5-years test, and depreciation taken after May 6, 1997, is taxed even when the rest of the gain is excluded [7]. Our guide to selling your US home after moving abroad covers the timing.

Renting it out

Lots of San Miguel owners rent to visitors in high season. A few points:

Mexican tax. Residents can deduct actual costs or take a standard 35% "blind" deduction, and a company tenant withholds 10% [3]. Non-residents are taxed on gross rent with no deductions. Platform rentals have their own withholding rules.
US tax. The rent goes on Schedule E. A house used predominantly outside the United States must be depreciated under the Alternative Depreciation System over 30 years, not the 27.5 years you'd use in Austin [8][9]. Predial, repairs, utilities and management fees are expenses. Mexican tax on the rent can be credited on Form 1116.
Records in both currencies. Convert each item to dollars and keep the rate you used.

Renting out the house back home instead? See our guide to rental income from a US property.

Which makes sense for whom

Retiring here for good. Buying usually makes sense once you hold residente permanente status and file as a Mexican tax resident. Add a Mexican will for the house so your heirs aren't stuck in probate in two countries.
Splitting the year. If you spend winters here and summers in Texas, think hard about where you're a tax resident. Selling as a non-resident costs 25% of the price in Mexico.
Moving back within a few years. Renting is often smarter. Closing costs take time to earn back, and selling quickly in a small market can take a while.
Selling a US home to fund the move. Sell while you still pass the 2-of-5-years test, so Section 121 covers the gain.

A US expat tax preparer (or a Mexican lawyer) can check your situation before you sign anything. To compare notes with other buyers, try our community group for Americans in Mexico.

Buying in San Miguel de Allende vs back home: the full tab