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Capital gains tax ..how much is it?


carmelbaloney

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How much is the capitals gains tax on a house? Everybody mentions it but nobody seems to know how much it is. What if the price listed on the deed was one of those lowball prices that were being put on several years ago? If the house is sold now would the seller have to pay the capital gains tax based on the difference of the obvious incorrect old price and todays sale price? Also, is there any consideration taken into account of the money spent on renovations. I hope you can understand what I'm trying to say.

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28.5% on the property's net basis, taxing the net gain, per two articles: http://yucalandia.com/living-in-yucatan-mexico/capital-gains-taxes-on-mexican-properties/ and http://www.mymexicanlawyer.com/real-estate-in-mexico/do-i-need-an-fm2-to-get-a-capital-gains-tax-exemption/

The first link also includes descriptions of how to calculate the deductions.

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There are some excellent points provided by the posters here, however I believe the germaine issue is the term "Capital gains tax"..I maintain that the tax is in fact not a capital gains tax as we understand it in the United States. It is not a tax on the "Gain/Profit" on the sale of a property that we have owned for X # of years. It is a tax imposed on us for the benefit of the Govt. and is only partially related to the actual capital gains, if any, on the sale of our residence. It is also not absolutely related to our immingration status although we are led to believe that it is. As expressed in the 2nd linked article it is tied to a particular Notary's interperation of the applicable laws and his willingness to accept financial responsibility for the "correctness" of the real estate transaction. One would be wise to consult with their realtor and various Notario's to shop for the most liberal settlement terms and not necessarily go with the realtors buddy.The old method of valuing property (to under state the purchase price to minimize taxes) is a thing of the past as evidenced by all the whinning regarding the increases in property tax bills due to recent tax evaluations conducted either in person or via aerial photo's. The buyer of the bogus sales priced property will now be the one who gets screwed when the time to sell happens. I state all this wil the realization that this is Mexico where "All Things Are Possible"..

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ckelly's experienced variations can come from how each Notaria has the discretion to approve or deny various deductions from the gain. Different deductions = different taxes. One bank Notaria representing the buyer's fideicomiso of friends who were selling their home, refused to allow deducting the original purchase price, which meant the 28.5% tax was calculated on the full sale price.

The buyer's Notaria can be difficult sometimes.

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  • 2 weeks later...

Not if the sellers indicates in the contract that a certain notario has to be used...I know I did that

I sold my house in Mexico and closed in Nov. In the contract I stipulated I wanted to use my Notaria. The bank who did the buyer´s INFONAVIT loan did not give me any leeway and used their Notaria so you are not correct in that the buyer is able to select the Notaria, in my case.

I also did not pay any closing costs. The costs I paid where for documents before the contract was given to the bank and were minimal. They required a new title search at the State Registar´s Office, survey, and search for liens. Our realitor did the paperwork to get the documents. That cost was $5,000 pesos and good for 3 months.

I feel it all depends on what state and what municipality you are in and cannot be generalized in all situations.

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  • 1 month later...

ckelly's experienced variations can come from how each Notaria has the discretion to approve or deny various deductions from the gain. Different deductions = different taxes. One bank Notaria representing the buyer's fideicomiso of friends who were selling their home, refused to allow deducting the original purchase price, which meant the 28.5% tax was calculated on the full sale price.

The buyer's Notaria can be difficult sometimes.

I don't want to contradict you, I'm sure you heard right. But this goes against all common sense. It is a rip off to charge taxes on your investment You put a part of your own money down when you bought your house, sometimes it iis even a mortgage that you have not cleared yet. How in all fairness can you pay taxes on your own investment? It beats me.

That is not the way I interpret the law, and it is not the way my notary interprets it either. You pay taxes on the difference from of what it cost you and what you sell it for--and that is called a PROFIT -- CAPITAL GAIN.

All the reports fron specialized accountants in Mexico talk about capital gain.

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I agree it is a ripoff for the notaria to not credit legitimate homeowner's exemptions. Since the notaria is personally responsible to pay any taxes on the deal if the SAT decides they were incorrect, they do have the legal right to disallow deductions that the seller claims as costs. Is every deduction legitimate that seller want to claim? As written above: "Different deductions = different taxes." The notarias are not required to give you every deduction you want to claim, so do your best to find a Notaria who agrees with your legitimate deductions. If you choose to not accept the Buyer's notaria's requirements, then find a different notaria or different Buyer.

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It is not ANY deductions that the seller wants the notary to consider, but the price he paid for his house which is written in his deed. That should not even be a question from the notary. I am starting to suspect that this lattitude notaries have could open the door to an abusive notary who would be able to pocket the extra money paid in taxes by the seller . . .

I'm not saying that your story was the case but it just does not make sense that the notary refused to consiider his deed and that he made the seller pay taxes on the money he had invested in that nhouse when he bought it. No where in the law this type of procedure is mentioned. You pay taxes on the profit. . . period.

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It was the Buyer's bank notaria who refused to allow deduction of the Seller's prior purchase price - and the bank backed-up the notaria's decision. In that case, the seller cannot really fight or sue, instead: find another buyer.

Sometimes in life, it is better to just walk away , rather than try to force others to do what we want.

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It is not ANY deductions that the seller wants the notary to consider, but the price he paid for his house which is written in his deed. That should not even be a question from the notary. I am starting to suspect that this lattitude notaries have could open the door to an abusive notary who would be able to pocket the extra money paid in taxes by the seller . . .

I'm not saying that your story was the case but it just does not make sense that the notary refused to consiider his deed and that he made the seller pay taxes on the money he had invested in that nhouse when he bought it. No where in the law this type of procedure is mentioned. You pay taxes on the profit. . . period.

Capital gain here is not what capital gain is in the US or Canada when considering house sales. It is a bit different here.

http://www.idconline.com.mx/calculadora/isr_casa_habitacion.html

Click this when using the house sales tax calculator I posted above to get to it.

"Abra este contenido en una nueva ventana"

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An acquaintance is selling her home. It was her first home, primary residence and been in it over 5 years. She insists that she will not be taxed on the profit it because of a first time sale waver.

I have not heard anyone ever mention that. Anyone know?

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Yes house exemption. Once every five years.

There are various legal ways notaries can help you pay less tax on your sale. Some do not know all of the ways. I have had to have my tax accountant talk to notaries before. They are not accountants or tax lawyers and as they can be personally liable for taxes owed they often err on the side of caution.

The taxes follow a moving scale and tops out I think at about 35% this year?

If you are not a resident there are almost no deductions. If you are there are quit a few. Then there are expenses that can be proven and ones that can't, there is a benefit if there is more than one seller etc.

Just a note. The notary only collects a estimated tax. Legally the seller is supposed to complete a tax declaration at he end of the year . Almost no one does this and I have never heard of anyone having a problem with it, don't want to worry anyone. I believe if you are selling your tax exempt house this is not an issue.

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