Selling Property in Los Cabos: Taxes, Costs & Steps

Whether you live in Los Cabos full-time, own a vacation condo you visit from Texas or Alberta, or inherited a home in San José del Cabo, selling property in Mexico works differently than in the U.S. or Canada. The biggest surprises usually come from one place: capital gains tax.

With the winter high season about to begin, and many buyers from Mexico, the U.S. and Canada arriving to look at property, now is a smart time to understand the process before you list. This guide covers how capital gains tax works, what sellers typically pay at closing, and the step-by-step path to a clean sale.

If you're still deciding whether to sell, start with our article Is It a Good Time to Sell My Property in Cabo?

Who Handles the Sale: The Notario Público

In Mexico, every real estate sale is formalized before a notario público, a government-appointed attorney who drafts the deed (escritura), verifies that the property is free of debts and liens, and calculates the seller's capital gains tax.

Under Mexico's Income Tax Law (LISR), the notary calculates the tax, records it in the deed and pays it to the tax authority (SAT). In practice, this means the tax is settled at closing, and the amount comes out of the seller's proceeds. Choosing an experienced notary and preparing your documents early makes a real difference in how much you pay.

How Capital Gains Tax (ISR) Works When You Sell

Mexico taxes the profit on a property sale through the Impuesto Sobre la Renta (ISR). How much you pay depends mainly on one question: are you a Mexican tax resident or not?

If you are a Mexican tax resident

This includes Mexican citizens living in Mexico and foreigners who are tax residents here (with an RFC and proof of tax residency).

• The tax is calculated on your net gain, not on the full sale price.

• You can deduct the original purchase price, adjusted for inflation, documented improvements, notary fees and acquisition taxes paid when you bought, appraisals, and the real estate commission on the sale.

• Under the law, the construction portion of your cost basis is reduced by 3% per year of ownership (never below 20% of the original construction cost). Land is not depreciated.

The primary-residence exemption. If the property is your actual home (casa habitación), you may be exempt from ISR on a sale of up to 700,000 UDIS (an inflation-indexed unit; roughly MXN 6.2 million in 2026). Key conditions:

• The property must be your real residence, proven with documents such as your INE, bank statements or utility bills at that address.

• You can use the exemption only once every three years.

• The sale must be formalized before a notary.

• If the price is above the limit, only the excess is taxed, with deductions applied proportionally.

Foreigners who are Mexican tax residents can also use this exemption, but the notary will require a sworn statement in the deed plus proof of tax residency (such as a constancia de residencia fiscal) and an RFC or CURP.

If you are NOT a Mexican tax resident

Most U.S. and Canadian owners of vacation homes fall here. The law gives two options:

• 25% of the gross sale price, with no deductions at all; or

• The top income-tax rate (currently 35%) on the net gain, if you appoint a legal representative in Mexico and the sale is made through a public deed.

On most properties held for several years, the net-gain option results in a much lower tax bill than 25% of the full price, but only if you can document your costs. That's why your paperwork matters.

Documents that can lower your tax

• Your original deed (escritura) and fideicomiso documents

• Proof of the acquisition tax paid when you bought

• Official invoices (facturas) for capital improvements such as additions, a pool or new rooms

• Your RFC (Mexican tax ID), if you have one

Routine maintenance and improvements paid in cash without facturas generally can't be deducted. If you're planning upgrades before selling, ask for facturas.

A note for U.S. and Canadian sellers: a sale in Mexico may also need to be reported in your home country. Talk to your tax advisor about how Mexican tax paid can be credited.

What Sellers Typically Pay at Closing

Closing costs in Los Cabos are mostly paid by the buyer, including the 3% acquisition tax (ISABI) in effect in Los Cabos since January 2025. As a seller, plan for:

• Capital gains tax (ISR), calculated by the notary

• Real estate commission, as agreed in your listing agreement and paid at closing

• Fideicomiso costs: canceling your bank trust or assigning your rights to the buyer, depending on how the buyer takes title

• Any outstanding balances: property tax (predial), water, electricity and HOA fees must be current

• Your own advisors, such as an accountant or legal representative if you choose the net-gain option

Not sure how your trust works? Read our guide: Fideicomiso Explained: Buying in Los Cabos.

Step by Step: How to Sell Your Los Cabos Property

1. Get a realistic market valuation. Pricing right from day one is the single biggest factor in how fast you sell. Overpriced listings tend to sit through the season.

2. Gather your documents early. Deed, fideicomiso contract, ID, RFC or CURP, improvement facturas, and recent predial, water and HOA receipts.

3. Get a capital gains estimate before you list. Ask a notary or accountant to estimate your ISR so you know your real net proceeds.

4. Prepare the property. Small repairs, good photos and a clean, staged home make a big difference to buyers who often first see your listing online from abroad.

5. List and market it. Exposure on the MLS and to buyers from Mexico, the U.S. and Canada matters. Many buyers visit Los Cabos between November and April.

6. Negotiate and sign a promissory agreement. Once you accept an offer, a purchase agreement sets price, deposit (usually held in escrow) and closing date.

7. Closing at the notary. The notary requests no-debt certificates, coordinates with the trust bank, calculates the ISR and records the sale. You receive your net proceeds.

Common Mistakes to Avoid

• Losing your purchase documents. Without proof of your original cost and improvements, you may end up paying 25% of the full price.

• Skipping the tax estimate. Sellers who don't calculate ISR in advance are often surprised at closing.

• Assuming you qualify for the residence exemption. A vacation home used a few weeks a year usually won't qualify.

• Ignoring the exchange rate. The sale is calculated in pesos, so currency moves can affect your taxable gain.

• Pricing on emotion. The market rewards well-priced, well-presented homes.

Ready to Sell Your Los Cabos Property?

At Cabo Smart Investments, we help owners from Mexico, the U.S. and Canada price, market and close their sales in Cabo San Lucas, San José del Cabo and along the Corridor, and we work with trusted notaries and accountants so there are no surprises at closing.

Request a free valuation of your property

WhatsApp: +52 624 118 3541

Disclaimer: This article is for general information only and is not legal or tax advice. Tax rules change; always confirm your specific situation with a Mexican notary, accountant or tax advisor.

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