Sale of Residence in Mexico

Forum|Forum|1 year ago
August 13, 2024
2 replies
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I have owned a home in Mexico for over five years and have sold it. It was never rented. Can I use the $250,000 capital gains exemption when I file my taxes.

pk12_2

Employee

@maggie2115 for US tax purposes , while you meet the ownership clause, you still will need to meet the use clause ( 730 days total used as main residence within a look back window of five years from the date of sale consummation ) and not taken this exclusion in the last two years. If you are filing joint then, at least one of you must meet the ownership clause but both must meet the use clause for the US$500,000 exclusion )

I am assuming that you are US person ( citizen/ GreenCard / Resident for Tax purposes ).

Does this make sense ? Is there more one of us can do for you ?

maggie2115Author

Thank you for your valuable feedback and confirming that I will need to prove at least 730 days in Mexico over the last 5 years from the date of sale.

With respect to the Mexican capital gains tax, we have already tackled that by becoming permanent residents of Mexico and meeting their criteria to avoid any tax liability.

I have fished through Turbo Tax looking where I would enter the residency information to gain the exception but could not find it. Can anyone direct me to where I would find the right form?

Gracious, again.

rjs

Employee

When you enter the sale of your home in TurboTax, it asks you some questions to determine whether you qualify for the exclusion, including questions about residency. If you did not see those questions, you might be entering the sale in the wrong place. In the Search box type "sale of home" (without the quotes), then click the link that says "Jump to sale of home." Or go to the following:

Federal Taxes
Wages & Income
Less Common Income
Sale of Home

If you need more specific instructions, tell us whether you are using TurboTax Online or the CD/Download TurboTax software, and which edition (Basic, Deluxe, etc.).

The information about residency does not go on your tax return. TurboTax just uses it to determine whether you qualify for the exclusion. You don't need to show proof unless the IRS questions your tax return.

rjs

Employee

As pk outlined, you can use the exclusion for U.S. tax if you meet all the requirements. It doesn't matter what country the home is in. But even if you are able to exclude part or all of the gain from U.S. tax, you might still have to pay tax to Mexico on the gain. You have to check the Mexican tax laws. We can't help you with that here.

pk12_2

Employee

@maggie2115 , very much agreeing with my colleague @rjs ( thank you ), we have not addressed the Mexican Tax portion. As far as I know ( and I do have properties in MX ), unless you also hold Mexican Nationality, there is always Mexican Capital Gains Tax in addition to IVA.

You should consult with a Mexican Lawyer on this .

Note that if you are able to exclude gains from US taxes, you may or may not qualify for foreign tax credit ( depending on the exact facts and circumstance ( nationality / location/ how-held Fidiecomiso etc. etc.)