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Selling your House Beware Permanente and Primary Residence

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Help!.   I decided to sell my house after 7 years (with permanente ) and was lucky to bypass the agent because a neighbor wanted my house.   I did not want a profit just the initial investment even though I put many improvements in the house.  The present contract is written with the original price.   Went to the notary and suddenly was hit by a huge Capital Gains estimate because the original deed was drawn up in pesos at 13 per dollar and this was with the guidance of a prominent Reat Estate company representing me.

Although I had the original buyers statement showing I paid what I was selling the house and the value of the peso at the time,  the notary dismissed it and said all I could do was to have a two men come out, one to assess the house and another to make an assessment of improvements to the house by which they take half of what I save in Capital Gains.  Although I have quite a few receipts they would not even come to a quarter of what I would pay in Capital Gains which is much more than what I would pay a Realtor even if I had to pay for one.  I am thinking of court since the expense has to be much less than the Capital Gains I would be paying. 

Update:   I am permanente and my house has been my only residence for over 5 years.

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It was common place here until a few years ago for notarios to help the sellers out by reducing the sale price of the house to reduce their capital gains. Since that has been stopped and true sale prices must now be used by Notarios,  complaints such as yours are frequent. I don’t believe you have an alternative if you wish to sell your home now because now the law is being followed. Before it was not, but most buyers did not understand nor have explained to them how they were being screwed at the closing of their just purchased home.

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Who was the Notary that told you what you have written..Sounds like you should head to another Notary and start the process over without a word about the other Notary..

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Which notary are you using? All you should need is an assessment of the house. IF the value has significantly increased since your purchase then yes there will be capital gains. I just checked historical exchange rates and it was 13 pesos per USD in mid 2012.

 

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True statement..but I would tell the neighbor I have decided not to sell..(Based on what he has learned) ..

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No. Only Al Berca's words are correct. Serious trouble awaits offenders now.

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If you are that friendly with the buyer, then make the contract subject to you the seller choosing a "suitable/more friendly" Notaria

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8 minutes ago, Al Berca said:

And screw their buyer instead of themselves. Another of your “great” ideas.

Excuse me how or when did I suggest mistreating the buyer...Have I missed something?...You must be aware that various Notaria have different methods for assessment of Capital Gains...an other one on Mexico's Consistent Inconsistent system

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As a permanente, you should be eligible for an exemption, which  is good for houses up to around $4M pesos or so.

Get an opinion from a different notario. First, ask what conditions are necessary to qualify and make sure you meet them.

Then tell your buyer you will not sell unless you can use a notario that will accept your exemption.

Pete

 

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peteben is correct. In addition, if this was your home for over 5 years (I think, but needs to be checked) then you should not have to pay capital gain tax. Your best bet is to blow a couple of pesos with a lawyer who should be able to confirm.

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^^We had 3 real estate transactions here in the last 6 months.  The above 2 posts reflect our experience during that time frame.   Good luck

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1 hour ago, Kiko said:

^^We had 3 real estate transactions here in the last 6 months.  The above 2 posts reflect our experience during that time frame.   Good luck

By 3 RE transactions in the last 6 months, do you mean three sales.... and no capital gains....interesting

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Don't forget that you can claim 2 exemptions if the deed is in your and your spouse's name. While this is not always common, we had ours done that way to protect each other. Little did we know that it would also save us the bite of the capital gains tax because "X" (very well known name) had the notario  write the sales contract for less than half of what we actually paid. Like many others, we believed that the law regulated the real estate agencies and that we could trust them. It was the first of many wake-up calls about ex-pats preying on ex-pats. There are also ways that a reputable notario can help you to reduce the tax. If you don't feel comfortable with the one you're using, go to another. There are many LEGAL ways that your bill can be reduced. 

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I have promised myself never write anything here again, only read for the great information (Thanks to many of you). Here I am again.

My understanding of capital gain exceptions are if:

1. You're selling your primary residence,

2. You're resident (both temporary and permanente) with tax ID (RFC).

One can make one claim once every 3 years based on if the land/yard isn't more than 3 times of the structure.

The flat rate exemption is like someone mentioned earlier 4 million pesos. A couple can claim each of your own if it's the primary residence.

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I also think that it is still three years but it is an important variable to nail down. It used to be two years... then it got changed to five years..... and then it got changed to three years. The OP has owned the house for SEVEN years. And, assuming that it has been their principal full time residence and never been rented out, then they SHOULD NOT have to pay any capital gains.

Go and see another Notario… hell, see ALL of them, until you find the honest one who will explain the above to you.

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Once every 3 years now. I didn't know they changed it from 5 years. Sorry.

Google Translation:

"23 dic. 2018"

"The sale of a property involves the payment of some taxes, here we tell you how you can exempt them or deduct them.

The sale of a property involves the payment of some taxes for both the buyer and the seller. In the case of the latter, it is possible to exempt or deduct taxes, but there are some conditions that must be met and that involve having documents that were issued at the time of purchase or that accumulate during the time that the property is inhabited.

Given this panorama, the National College of Mexican Notaries shares some key questions with our Vivanuncios readers:

What are the costs of deed?

Normally they are paid by the buyer and are: property acquisition tax (it is local and, in some places, it is called domain transfer tax); public registry rights; rights for the obtaining of certificates or certificates of various dependencies (such as the certificate of freedom of encumbrances, proof of non-payment of contributions, proof of land use, cadastral plans, etc.); disbursements (payment to managers, transfers, appraisals, travel expenses, etc.); finally the notary's fees and the corresponding VAT.

In the case of the seller, do you have to pay any tax?

When a person obtains income from the alienation of a property, that is to say his sale, he must pay the Income Tax (ISR). This tax is only paid by natural persons and, in many cases, it is the notary himself before whom the sale is made who retains it.

"There are some cases in which it is possible to exempt the ISR payment or deduct expenses that are subtracted from the profit from the sale of the property and, as a result, a lower tax is paid or nothing is paid. In the case of legal entities, income is also taxed, but it is accumulated together with other income. It is worth mentioning that there are also non-profit moral persons forced to pay this tax as if they were natural persons, there are also cases in which some individuals who are taxed with the business activity regime although they do cause this tax, the notary does not keep them ; in these cases in particular, due to the complexity of the subject, it is appropriate to go to a notary to ask for advice, "says Mr. José Antonio Manzanero Escutia, President of the National College of Mexican Notaries.

How can the ISR payment be waived?

Are exempt from this tax the income obtained from the sale of housing for up to an amount of 700,000 Udis (approximately 3.9 million pesos), for each of the vendors in question; this is for each person who sells, provided that proof that it is precisely the house in which they live with the following documents: Tax receipts of payments made of electricity. Tax procurements of payments made by telephone. Bank account, commercial or of non-bank credit cards. Voter registration card that states as the address the house that is sold. The aforementioned documents may be in the name of the taxpayer, his spouse, his ascendants or descendants in a straight line. every 3 years

What can be deduced in the ISR?

In cases where it can not be exempted (for already having done it in a period of 3 years, for exceeding the amount established by law or not being a room) some concepts that the notary will take into account to calculate the corresponding tax may be deducted. .

To do so, invoices and tax receipts must be delivered to the notary for these concepts. It is very important to say that some of these invoices are obtained at the time of purchase and others during the time that the property is inhabited and can not be recovered if they were not requested at the time.

1. Proven cost of acquisition (what the seller cost to acquire the property). It is credited for properties acquired before April 2014 with the corresponding writing and thereafter with a supplement to the Notary's invoice (CFDI) with said information. It is very important to ensure that you have the notary's invoice from the purchase of the property, otherwise it can not be deducted at the time of sale.

2. Investments in buildings, improvements and extensions. They are credited with the corresponding invoices with the notice of completion of work or with an appraisal (in the latter case only 80%). The recommendation here is always to have the bills in order and give all notices to avoid any problems in the future.

3. Notary fees. These, as stated before, are credited with the corresponding invoice.

4. Commissions and mediations. This refers to the amount paid to real estate brokers or "brokers". Before it was established that to deduct these expenses an invoice must be required at the time of purchase; if you do not have it, there will be no deductibility of this concept.

It is advisable to ask the notary everything related to the exemption and deduction of the ISR from the acquisition of the property, because if you do not have this information and, where appropriate, documents, you may not be able to get the necessary elements later.

Follow us at @notariadomex and @ Vivanuncios to see more notary tips for your daily life."

 

https://blog.vivanuncios.com.mx/bienes-raices/abc-exentar-deducir-isr-al-vender-casa/

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Many people the last few years commented they have used Notario #2 in Chapala and liked him. We used him, too.

He speaks excellent English, throughly and patiently answered all of our questions.

(I don't have any ideas on the others so can't comment or reccomend.)

Best luck on selling your house!

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Go see Notario #2, Luis Enrique Ramos Bustillos.  He is actually not in Chapala, but near the Chula Vista golf course in San Antonio. The address is Calle del Parque Ote #60, Chula Vista. Call for an appointment to 766 0190 or 766 0290.   He is an excellent person to deal with and perhaps he can help you more than the other notario you saw.

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