Tax Tips 2018 No. 3

HOW DOES THE NEW 2018 US TAX LAW CHANGE THE RULES FOR

REAL ESTATE ON YOUR PERSONAL US TAX RETURN?


by Don D. Nelson, International Tax Attorney at Law
Partner in Kauffman Nelson LLP, Certified Public Accountants

Many owners of real property in Mexico have been concerned about the effect the US new tax laws will have on their ownership of real property in Mexico.  The new law is complex and it provisions involving foreign matters are confusing.

 

If you own your Mexican property in your own name or through a Fideicomiso (bank trust) there may be some changes has under the new Trump tax laws. If it is your personal residence the same rules apply as to a personal residence in the US.  This means you are now limited under the amount of property taxes you can deduct and may receive no benefit from deducting your mortgage interest.  Read more about the changes in itemized deductions for residences or second homes here: http://us-mexicantax.blogspot.com/2018/01/new-us-tax-laws-concerning-personal.html

 

If your Mexico property is a full time rental property, the rules have generally remained the same.  The main difference is that residential rental properties are depreciation (written off) over a 27.5 years in the US and 40 years when located in other countries.

 

If your business or rental property is held in a Mexican corporation, and it has not elected to be treated the same as you owning the property individually for US tax purposes (allowed if you file a form with IRS  for an SRL), you may have to pay additional tax in 2017 if you have allowed income to accumulate in the corporation and have not distributed it to yourself.  Read more about this new tax on accumulated income in foreign corporations at this link:

http://us-mexicantax.blogspot.com/2018/01/new-us-tax-law-may-cause-you-to-pay.html

 

If you have questions on any of these changes, email Don at ddnelson@gmail.com