Are you living in Baja California Sur or somewhere else in Mexico? If so, this latest episode of The Nick Fong PODCAST reveals what you need to know about how to deal with U.S. taxes explained by an expert. Today, Nick Fong, the founder and broker of Ronival Real Estate meets with Don Nelson, an attorney and CPA from the U.S. and a long-time resident in Baja Sur.
Gain an understanding of what you must do with your taxes if you earn money while in Mexico. Then, uncover whether you can do a 1030 exchange, which is explained here and in the video as Nick interviews Don. Therefore, continue reading to learn more.
Some info about Don Nelson
Don Nelson first arrived in Cabo about 30 years ago. As he says in the video, he started meeting people who were not filing their U.S. taxes. His idea was to help them file their taxes, since he was already there in Cabo. Since then, Don now helps well over 200 people per year to do their tax returns in the U.S.
On top of tax returns for U.S. citizens living in Baja Sur, Don Nelson also helps his clients render tax planning and estate planning along with other tax advise for people living in Cabo and throughout Baja California Sur.
Tax return requirements for Americans
According to Don Nelson, U.S. citizens must file income tax returns regardless of where they live in the world. That means, they must report their world-wide income. But of course, Americans get credit for taxes paid in foreign countries along with other benefits. As Don mentions, many U.S. citizens are not aware of this. As such, he helps them get caught up on their income tax returns.
What is the IVA tax?
In this first video, Nick Fong talks about IVA tax, which is a sales tax in Mexico. The IVA tax is charged by the Federal government on all products and services. It is 16% of the purchase price. Fortunately, this tax does not apply to real estate, which has a 2% acquisition tax instead.
So whenever you go shopping, like at Costco, you can expect to pay sales tax just like in the United States and Canada. But of course, many of the small shops and taco stands don’t charge IVA.
Uncover Capital Gains Tax in Mexico
Just like in the United States and Canada, whenever you sell a property for more than you spent for it, the profit is considered Capital Gains.
At the time of purchase, your currency is converted into Mexican Pesos at the current rate and are used to buy the property. Therefore, the purchase price is shown in Pesos. Then, at the time of closing, the selling price in Pesos is compared to what you originally paid for it in Pesos. If the selling price is higher than the purchase price, a Capital Gains tax is calculated.
Listen to this new episode of The Nick Fong Podcast
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Work With Ronival Real Estate
Ronival Real Estate has helped thousands of buyers and sellers across Los Cabos since 2010. If you’re interested in Cabo Real Estate, our team can assist with everything from showings and negotiations to closing and property management. Have questions? Contact us here or call +52 (624) 227 5766.