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Questions for American expats who file both USA and Mexico tax returns

Last activity 21 September 2020 by JulianDave

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Rdc4

I’m considering retiring to Mexico. I know that American citizens are required to file and pay taxes in the USA regardless of where they may live. I also understand that Mexico also taxes Americans on worldwide income for those that live in Mexico and are considered tax residents.  I would be considered a tax resident as I plan on living in Mexico full time and obtaining permanent residency. Can anyone provide me some information on the following:

1) I’m 55 and have some savings, investments and pensions all from USA sources. My pensions will not be available until I’m 62 at the earliest and I plan on living off my savings and investments for 8 years. The investment I will be withdrawing from is a 457b (similar to 401k). I plan on withdrawing 2000 a month and know that I will have to pay USA tax as the withdrawals are considered taxable income.  Assuming I have to pay $1000 usd on $24,000 annual income (I’m making this up) how would that effect the amount I have to pay in Mexican tax?  Say I complete a Mexico tax return on my $24,000 and I owe $1500 in taxes. I know there is a tax treaty that prevents American from double taxation. Would I end up paying $1000 in taxes to USA and then be able to apply the $1000 as a tax credit for Mexican taxes and only have to pay $500 in Mexico taxes? Is this how taxes generally work for an American that has to pay Mexico taxes?

2) For those that have filed both USA and Mexico tax returns do you usually have to pay both USA and Mexico for taxes? How much extra in taxes beyond the amount paid to the USA do you pay to Mexico?

I’m trying to obtain an understanding on how the tax system works  and how much (if any) additional tax one usually pays beyond the taxes paid to the USA. Do most people have to pay additional tax to Mexico after paying USA tax? Thanks again for any input you can provide.

GuestPoster5542

If you don't work in Mexico then you don't have to pay taxes there; that what's I understand, but following. Not even sure you have to fill a tax return there either.

Rdc4

expatimmigre wrote:

If you don't work in Mexico then you don't have to pay taxes there; that what's I understand, but following. Not even sure you have to fill a tax return there either.


Thanks for your response. I’ve looked into it online and read some other posts in this forum and my understanding is if you are an American who is resident of Mexico and live there full time then you are taxed on your worldwide income. I also have found out that if you are an American living in Mexico without a legal address in America that your investment accounts could be closed or frozen. Mexico also taxes capital gains differently than the USA.  If I can’t make any sense of this tax treatment I might look into other countries that don’t tax foreign income like Costa Rica, Panama, or the philipines.

GuestPoster5542

Also try the expat mexico forums on FB. THere are thousands of retirees who use those forums and you may get better answers

Rdc4

expatimmigre wrote:

Also try the expat mexico forums on FB. THere are thousands of retirees who use those forums and you may get better answers


Okay..Thanks.

JulianDave

If you are not working and making money in Mexico, you are not paying Mexican taxes. Not on money from a pension or withdrawals from your bank. If you buy and sell real estate in Mexico, have a job there, etc, then yes, that's different, but the typical retiree is not paying Mexican taxes on what they live on, as long as it comes from the US.

Check out the FB forums. I've been on and off of them. Retirees are not taxed.

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