Can you avoid capital gain tax on sale of foreign property?
James Williams
Updated on March 11, 2026
A word of warning — you may also owe taxes to the country in which the overseas property lies, but you may be able to avoid paying capital gains taxes to both countries by claiming the foreign tax credit, which is a dollar-for-dollar credit on taxes paid to one of the countries.
How do I sell my house from USA to Mexico?
How to Sell My Home in Mexico
- Take a copy of your deed and your last property tax receipts to a Notario Publico (Mexican contract lawyer and Notary Public).
- Value the home.
- Advertise the home in English-written newspapers, on locally placed bulletin boards in churches, grocery stores, and clubs where foreigners visit.
Do I have to pay capital gains on foreign property?
If your foreign property did not qualify as a primary residence, you will be subject to the standard capital gains tax rates. If the foreign property you sold is regarded by the IRS as an investment property, you will need to pay the standard capital gains tax rate without any deductions.
Do you have to pay capital gains tax in Mexico?
When you have sold a property you may have to pay the Mexican government Capital Gains Tax. There are two options for determining Capital Gains Tax on a property sale: Gross Sales Amount: Where 25% of the “gross sales amount” is paid without deductions.
How much tax do you pay when selling a property in Mexico?
Non-residents selling Mexican property are obligated to pay 25% of the total gross income or 35% of the net gain less allowable deductibles. Never agree to register a lower purchasing price when you buy property.
Do you have to be permanent resident to sell property in Mexico?
* Mexican income tax law does not expressly state whether the foreign person selling a property must have temporary or permanent residency status to avail themselves of capital gain tax exemptions; it does, however, expressly state that the seller must be selling his/her primary residence in order to qualify for tax exemptions on capital gains.
Can you deduct capital gains on second home in Mexico?
Many of the deductions and/or exemptions allowed against capital gains are for Mexico residents only. Capital gains deductions cannot be itemized on second or vacation homes or investment properties. Always have the Notary make a note of the exchange rate.
