Taxes for Americans living in Mexico: what still goes to the IRS, and when Mexico counts you
The IRS keeps taxing you after you move, Social Security stays US-only, and Mexico taxes your worldwide income once your home is there. The exclusion, the FBAR, the treaty and Mexican tax residency, explained.
The short answer: moving to Mexico doesn't end your US taxes. Whether Mexico taxes you too depends on where your home is, not on your visa.
The US taxes its citizens wherever they live, so you keep filing a US return every year. Under the US–Mexico tax treaty, Social Security is taxable only in the US. If you work, the foreign earned income exclusion can exclude up to $132,900 of 2026 earnings, but not self-employment tax. Report Mexican bank accounts on an FBAR once your foreign accounts total more than $10,000. Mexico taxes your worldwide income only if you become a Mexican tax resident, and having your home in Mexico usually makes you one. The treaty and the foreign tax credit then keep you from paying full tax twice.
This guide is for US citizens and green-card holders. It covers what the IRS still expects, how each kind of income is treated, and when Mexico starts counting you as a taxpayer. It's general information to help you ask the right questions. Your own return needs a preparer who handles expat returns and, if you're a Mexican tax resident, a Mexican accountant (contador).
What the IRS still expects
- A Form 1040 every year, under the same filing thresholds as at home. Self-employment income of $400 or more triggers a return on its own.
- An automatic extension to June 15 if you live outside the US on April 15. Attach a statement saying you qualify. Interest still runs from April 15 on any tax you owe, so pay by then if you can. You can extend further to October 15 with Form 4868.
- Your state may still want a return. Some states keep treating you as a resident until you've clearly given up your home there, for example by selling the house or ending your driver's license and voter registration. Check your state's rules before you assume you're done with it.
How each kind of income is taxed
| Income | US | Mexico, if you're a Mexican tax resident |
|---|---|---|
| Social Security | Taxed as at home | Not taxable: the treaty gives it to the US only (Article 19) |
| Federal, state or military pension | Taxed as at home | Generally not taxable, unless you're also a Mexican national (Article 20) |
| Private pension from past employment | Taxed, because the US taxes its citizens regardless | Taxable: the treaty gives it to your country of residence (Article 19), and foreign tax credits then reduce the double tax |
| Wages or freelance income for work done in Mexico | Taxed, but the exclusion or the foreign tax credit can remove most of the income tax | Taxable |
| Interest, dividends, capital gains | Taxed as at home | Taxable as part of your worldwide income; the treaty's credit rules (Article 24) decide how much each country gives up |
IRA and 401(k) withdrawals, Roth accounts and annuities have their own treatment in each country, and they are exactly where a cross-border preparer earns their fee.
If you work: the foreign earned income exclusion
The foreign earned income exclusion (Form 2555) removes earned income from US income tax, up to $130,000 for 2025 and $132,900 for 2026, per person. To claim it you need a tax home abroad and one of two tests:
- Physical presence: at least 330 full days outside the US in any 12-month period. Travel days and visits home count against you.
- Bona fide residence: you've genuinely lived in Mexico for an uninterrupted period including a full calendar year.
What it doesn't do:
- It covers earned income only. Pensions, Social Security, interest and dividends don't count.
- It doesn't cover self-employment tax. A freelancer still owes US Social Security and Medicare tax on the excluded income. The US has social security agreements that stop this double contribution with about 30 countries, and Mexico is not one of them.
- It isn't automatic. You claim it on a filed return.
If you pay Mexican tax on the same earnings, the foreign tax credit (Form 1116) is often better than the exclusion, because Mexican rates go up to 35%. Your preparer can run both.
Working remotely from Mexico also raises an immigration question, separate from tax: whether your status allows it. ResidencyMexico covers that in its guide for remote workers.
Reporting your Mexican bank accounts
- FBAR (FinCEN Form 114): required if all your foreign accounts together exceeded $10,000 at any time during the year. A Mexican checking account and a brokerage account both count. It's filed online with FinCEN, not with your tax return, and it's due April 15 with an automatic extension to October 15.
- Form 8938: filed with your return when your foreign financial assets are larger. For people living abroad, it starts at more than $200,000 at year-end or $300,000 at any time if single, and $400,000 or $600,000 if filing jointly.
The penalties for missing these forms are far larger than any tax involved. Getting pesos covers the accounts people use in the first place.
When Mexico counts you as a taxpayer
Mexican tax residency has nothing to do with your immigration card. A tourist can be a tax resident, and a resident card holder may not be. Article 9 of Mexico's Federal Tax Code says you are a tax resident if you have established your home (casa habitación) in Mexico. If you also have a home in another country, you are a Mexican tax resident when your center of vital interests is in Mexico. Among other cases, that means:
- more than 50% of your income in the calendar year comes from Mexican sources, or
- Mexico is the main center of your professional activities.
Some practical consequences:
- Selling the US house and living only in Mexico generally makes you a Mexican tax resident under Mexican law, even if all your income comes from the US.
- Snowbirds who keep a home in the US and spend the winter in a Mexican rental, with US income, are usually not Mexican tax residents, because their center of vital interests stays in the US.
- If both countries claim you, the treaty's tie-breaker (Article 4) looks at where you have a permanent home, then your center of vital interests, then where you habitually live, then your nationality.
As a Mexican tax resident, you owe Mexican income tax on your worldwide income, at progressive rates up to 35%. You need a Mexican tax ID (RFC), and you file an annual return in April for the year before. Under the treaty, Social Security and US government pensions stay out of it. For income both countries tax, the US generally credits the Mexican tax against your US tax, so your total is usually close to the higher of the two, not both added together.
Being a Mexican tax resident has an upside too. Residents who sell their home in Mexico can be exempt from Mexican capital-gains tax on a sale of up to 700,000 UDIs (inflation-indexed units), done before a notary, once every three years. That matters if you buy a home intending to sell it one day.
What to do before your first tax season in Mexico
- Keep a day count of where you are each day. The physical presence test and Mexico's own rules both depend on it.
- Decide, with a preparer, whether you're likely to be a Mexican tax resident. If you are, get an RFC and a contador. Once you have the RFC, you'll be asked for your constancia de situación fiscal.
- List your foreign accounts and their highest balances for the FBAR.
- Check your state's rules for ending residency.
- Keep Mexican tax receipts (facturas and payment proofs), since the US foreign tax credit needs proof of tax paid.
Frequently asked questions
Do I have to file US taxes if I live in Mexico?
Yes. US citizens and green-card holders file a US return wherever they live, using the same income thresholds. Living abroad gives you an automatic extension to June 15, but interest on unpaid tax runs from April 15.
Does Mexico tax US Social Security?
No. Under Article 19 of the US–Mexico tax treaty, US Social Security benefits paid to a resident of Mexico or to a US citizen are taxable only in the United States.
When do I become a tax resident of Mexico?
When you establish your home in Mexico. If you also have a home elsewhere, when your center of vital interests is in Mexico, for example when more than half your income comes from Mexican sources. Your visa or resident card doesn't decide it.
What is the foreign earned income exclusion for 2026?
$132,900 per person, for earned income only, if you have a tax home abroad and meet the 330-day physical presence test or the bona fide residence test. It doesn't reduce self-employment tax.
Sources
- US–Mexico income tax treaty (in force since 1993): Article 1(3) (the US taxes its citizens regardless), Article 4 (tie-breaker), Article 15 (wages), Article 19 (pensions, Social Security), Article 20 (government pensions), Article 24 (relief from double taxation).
- Código Fiscal de la Federación, Article 9 (tax residency); Ley del Impuesto sobre la Renta, Articles 1, 93(XIX)(a) and 150 (worldwide income, home-sale exemption, April annual return).
- IRS: automatic extension to June 15, foreign earned income exclusion, FBAR, Form 8938 thresholds, and Publication 54 (self-employment tax abroad).
- 2026 exclusion amount ($132,900, Rev. Proc. 2025-32): KPMG summary.
- Social Security Administration, US international social security agreements (Mexico is not among the agreements in force).
Last checked October 13, 2026. This is general information, not tax advice: rules depend on your whole situation, and both countries change them. Use a preparer who handles US expat returns and, if you're a Mexican tax resident, a Mexican contador. If something here doesn't match your experience, please tell me.
