Schmidt & Co

Guide · 7 min

Taxes after you move: the United States and Mexico

U.S. citizens still file. Mexico may tax you too. The Foreign Earned Income Exclusion is real, and it is narrower than a Facebook group.

Leaving Texas does not leave the IRS. Mexico has its own rules for people who make this their home. The two systems talk to each other through a treaty. They do not cancel each other because you changed your mailing address.

Figures checked 5 October 2026. Schmidt & Co coordinates qualified professionals. We do not give legal, immigration, tax, or investment advice, and we do not file applications for you.

The United States still wants a return.

U.S. citizens and resident aliens report worldwide income. Living in Playa del Carmen does not end that. What can change is whether some of the income is excluded or credited.

The Foreign Earned Income Exclusion (Form 2555) lets a qualifying person exclude foreign earned income up to a cap: $130,000 for tax year 2025, and $132,900 for tax year 2026, per the IRS. You must have a tax home abroad and meet either the bona fide residence test or the 330-day physical-presence test. Wages for the U.S. government do not qualify. The exclusion is not automatic — you file for it.

IRS Foreign Earned Income Exclusion caps

Tax yearMaximum exclusion per qualifying person
2025$130,000
2026$132,900

Pensions, Social Security, and many kinds of investment income are not “foreign earned income.” The exclusion is about pay for work you perform abroad.

Mexico looks at where your life sits.

SAT, Mexico’s tax authority, treats a person as a Mexican tax resident when their home is here, or when Mexico is the center of their vital interests — including, in SAT’s English summary, when more than half of annual income comes from Mexican sources, or when professional activity is centered here.

Mexican tax residents are taxed on worldwide income. People SAT treats as residents abroad are generally taxed on Mexican-source income. Renting a condo in Quintana Roo is Mexican-source. So is selling it. The treaty between the United States and Mexico exists to limit double tax, not to erase it. A cross-border CPA should draw that map for your facts.

The house has its own taxes.

Buying: the buyer pays the municipal acquisition tax (ISAI / ISABI) at closing. Owning: predial, a municipal property tax, is usually modest next to a Texas bill, and it is not a substitute for U.S. reporting if you are a U.S. person. Selling and renting have Mexican tax consequences that a notary and a tax professional calculate on the file.

Short-term rentals can also carry local lodging tax. That belongs in the yield math, not in a surprise in month fourteen.

What to do before you need it.

Sit with a professional who files in both countries before you pick a residency date, a rental plan, or an entity. We introduce that person. We do not replace them. The cheapest mistake on this coast is a clean closing and a messy first April.

Questions.

If I qualify for the FEIE, do I skip a U.S. return?

No. The IRS is explicit: the exclusion applies when you file and claim it. You still report the income.

Does Mexico tax my U.S. remote salary?

It depends on whether SAT treats you as a Mexican tax resident and on how the income is characterized. That is a facts-and-circumstances question for a tax professional, not a sentence on a website.

Is there a U.S.–Mexico tax treaty?

Yes. It can reduce double taxation. It does not mean “I moved, so I pick the lower rate.” Have someone who has used the treaty on a file like yours read your situation.

Sources.

  1. IRS — Figuring the foreign earned income exclusion (2025 and 2026 caps)
  2. IRS — Instructions for Form 2555 (2025)
  3. SAT — Who is a resident abroad (English summary)

If the numbers still make sense, we can talk about the move.

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