Tax Tips 2018 No. 1

by Don D. Nelson, CPA and Attorney at Law.


If I rent out my property in Mexico do I need to report it on my US tax return?.

Yes, unless you want to commit a crime. As a US citizen you report your rental income on property you own everywhere in the world. You can however get a credit for income taxes you pay in Mexico on that rental income which will directly offset your US taxes on that rental income dollar for dollar. Therefore you will not get double taxed. Most of the rules are the same as those for rental properties in the US.

If you are not aware of your obligation to report your foreign rental obligation, it is best to amend past tax returns before the IRS discovers it.  The IRS audit procedures tell agents to go easy on those who come forward first to correct prior errors.

Do I need to get a FACTURA (Invoice) to deduct my tax deductible expenses in Mexico on my U.S return?

Though a FACTURA is required to deduct expenses on a Mexican tax return, they are not required for your US return. Therefore you may often have deductions on your US return you cannot take on your Mexican return. All that is required for US tax purposes is a receipt or a contemporaneous written record (in some cases).

For information on how to pay your taxes in Mexico: Courtesy of Don D. Nelson