US Citizens Working in Mexico
See what you actually take home after US and Mexico taxes — whether you're already working abroad or planning a move.
Here's what matters most for US citizens working in Mexico:
- •Mexico has a progressive income tax system with rates up to 35%
- •FEIE can exclude up to ~$126,500 from US taxation if you meet the physical presence test
- •Cost of living in Mexico is significantly lower than the US, increasing purchasing power
- •US-Mexico tax treaty helps prevent double taxation
Who taxes you?
As a US citizen working in Mexico, you're subject to taxation by both countries. The US taxes citizens on worldwide income, but the Foreign Earned Income Exclusion (FEIE) can exclude up to approximately $126,500 of foreign earned income if you meet the 330-day physical presence test. Mexico taxes residents on Mexican-sourced income with progressive rates. The US-Mexico tax treaty provides foreign tax credits to prevent double taxation.
Common pitfalls
- Not meeting the 330-day physical presence test disqualifies you from FEIE
- Mexican tax rates vary by income level and can be complex
- State tax obligations may persist if you maintain US state residency
- Currency fluctuations between USD and MXN can impact your effective income
- Social security contributions may apply depending on your employment structure
Frequently asked questions
Yes. US citizens must file US tax returns regardless of where they live. However, you may not owe US taxes if your income is below the FEIE threshold and you meet the physical presence test.
Mexico has a progressive income tax system. Residents are taxed on Mexican-sourced income. Tax rates range from 1.92% to 35% depending on income level. You can claim foreign tax credits on your US return to offset taxes paid to Mexico.
Cost of living in Mexico is significantly lower than the US. Your purchasing power can be 2-3x higher depending on the city. Major cities typically have a cost of living index around 35-50% of New York City.
Generally no. The US-Mexico tax treaty and foreign tax credits help prevent double taxation. You'll typically pay the higher of the two tax rates, not both.
Official resources
Primary sources:
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