Selling Inherited Property and Tax Implications in Mexico

If you inherited a home in Los Cabos, here is the short answer: Mexico has no inheritance tax. You pay nothing to receive the property. Taxes come later, when you sell, and they are calculated in a way that surprises most U.S. families.

We help heirs from California, Texas and Arizona sell inherited homes, condos and lots in Cabo San Lucas, San José del Cabo and the Tourist Corridor. This guide explains what happens when you receive the property, how the tax on the sale really works, and what to prepare before you list it.

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📊 Inherited Property Taxes at a Glance

🔑 Receiving the Property: No Tax, but Paperwork

Under Mexico's Income Tax Law, property received through an inheritance is exempt from income tax (ISR). There is no federal inheritance or estate tax in Mexico.

The work is legal, not fiscal. Before you can sell, the property must be in your name. How that happens depends on how the owner held title:

Most foreign owners in Los Cabos hold property through a fideicomiso. If you own in Cabo today, naming substitute beneficiaries is the easiest gift you can leave your family.

💰 Selling: How the Tax Is Really Calculated

When you sell, you pay income tax (ISR) on the gain. The notary who signs the sale calculates the tax and pays it to the SAT, so it is settled at closing.

The gain uses the original owner's cost. For inherited property, Mexican law takes the price your parent (or the person you inherited from) paid, and the date they bought it. That cost is adjusted for inflation from their purchase date. It is not the value on the day you inherited.

This matters for long-held Cabo homes. A house bought 20 years ago for much less than today's price can show a large taxable gain. Find the original purchase deed and receipts for improvements early: they lower the gain.

🧾 Your Rate Depends on Your Tax Residency

For most U.S. heirs, the 35%-of-the-gain option is better when the gain is small compared to the price. Your notary runs both numbers.

🚫 Common Myths About Inherited Property in Mexico

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📋 Other Costs to Plan For

• Estate process or trust transfer: notary fees, bank trust fees and legal fees to put the property in your name.
• State transfer tax (ISAI): depending on the case, Baja California Sur may charge it when the property is adjudicated to the heirs. Ask your notary.
• Appraisal (avalúo): required for the sale and used in the tax calculation.
• Certificates and clearances: property tax (predial), water and HOA fees must be up to date before closing.
• U.S. taxes: U.S. citizens are taxed on worldwide income. Read Do I Pay Taxes in the US if I Sell My House in Mexico? and ask your U.S. tax advisor how the Mexican tax can be credited.

✅ Step by Step: Selling an Inherited Home in Los Cabos

1. Gather the documents: original purchase deed, fideicomiso contract, any will, and receipts for improvements.
2. Put the property in your name through the trust transfer or the estate process.
3. Get an appraisal and bring property tax, water and HOA payments up to date.
4. Ask the notary to estimate your ISR before you set a price, so you know your net.
5. Price it right. See How to Determine the Market Value of Your Los Cabos Property.
6. List and close. Our step-by-step selling guide walks you through it. At closing, the notary calculates and pays the tax.

❓ FAQs

Is there an inheritance tax in Mexico?

No. Receiving property through an inheritance is exempt from income tax (ISR), and Mexico has no federal estate tax.

How is the tax calculated when I sell an inherited property?

ISR is charged on the gain: the sale price minus what the original owner paid, adjusted for inflation from their purchase date, minus allowed costs.

I live in the U.S. What rate do I pay?

As a non-resident, you pay 25% of the total price with no deductions, or 35% of the gain if the conditions of the law are met. Your notary compares both.

Can I avoid the tax by buying another property?

No. Mexico does not have a reinvestment exemption.

Do I need to be in Mexico to sell?

Not always. Many heirs sign through a power of attorney granted before a notary or a Mexican consulate. Ask us before you travel.

Source: Mexican Income Tax Law (Ley del ISR), articles 93, 124 and 160, and our local experience. This article is general information, not legal or tax advice. Every case is different: confirm the numbers with your notary and tax advisor.

Disclaimer: Karla & Erick | Cabo Realty provides educational content about real estate in Los Cabos. We help buyers and sellers, mainly from the United States, buy and sell homes, condos and lots in the region. We are MLS members and operate under the brokerage Century 21 Paradise Properties. We are not lawyers, notaries or tax advisors.

Karla & Erick | Cabo Realty | Century 21 Paradise Properties