ISR on Selling a Home in Mexico: What You Pay and How to Be Exempt

When you sell a home at a profit, the tax authority can charge you Impuesto Sobre la Renta (ISR, income tax) on that gain. The good news is that the sale of your primary residence (casa habitación) can be exempt if you meet certain requirements. In this guide we explain how ISR is calculated, when the exemption applies, the UDIS cap, and why the notary public (notario público) is the one who withholds and remits the tax.

Who pays ISR on a sale?

ISR on the sale of real estate is paid by the seller, since the seller is the one who earns the gain. It is not calculated on the total sale price, but on the profit: the difference between what you received when selling and what it cost you to acquire the property (adjusted and with deductions). The buyer, for their part, pays the ISAI (property acquisition tax) and the closing costs for the escrituras (deed).

How the taxable gain is calculated

The calculation is done by the notary based on the ISR Law (Ley del ISR). In broad terms, the procedure considers:

The result depends heavily on how many years you owned the property and how well documented your improvements and investments are. Keeping invoices is key.

The primary-residence exemption

The law allows the gain on the sale of your primary residence (casa habitación) to be exempt if you meet the requirements. It is the most relevant benefit for most families.

The UDIS cap and the excess amount

The primary-residence exemption is not unlimited: it applies up to a cap expressed in UDIS (Unidades de Inversión, inflation-indexed investment units). Above that limit, the portion of the gain that exceeds it does pay ISR. The cap's value in pesos varies because the UDIS value changes daily with inflation, so it's best to verify the current figure at the time of sale.

Don't confuse UDIS with UMA: for this exemption, the benchmark is the UDIS. Since the exact figure is updated regularly, avoid taking a fixed number from the internet; ask the notary for the formal calculation.

Why the notary withholds

In transactions formalized before a notary, the notary calculates, withholds, and remits the ISR on the seller's behalf. This means the corresponding tax is deducted from the sale price and the notary pays it to the SAT (Mexico's tax authority), giving you the receipt. This mechanism provides certainty and, in most cases, spares the seller from having to remit the tax on their own.

Deductions that reduce ISR

The better you document your cost and your investments, the lower your taxable gain will be. If you plan to sell your property, get this documentation in order ahead of time.

Frequently asked questions

Is ISR always paid when selling a home?

Not necessarily. If the property is your primary residence and you meet the requirements, the gain can be exempt up to the UDIS cap. Outside that scenario—land, second properties, or the excess above the cap—ISR is paid on the gain.

Does the exemption apply to land or an investment home?

The exemption is designed for the primary residence. Undeveloped land and properties that are not your usual home generally don't qualify, so their gain is taxable.

How do I prove it's my primary residence?

With documents in your name that show the property's address: utility bills, bank account statements, or a voter ID (credencial de elector), among others. The notary will tell you which documents are accepted to prove it.

Can I reduce ISR with the improvements I made?

Yes, as long as you have invoices to back them up. Documented improvements increase your proven cost basis and therefore reduce the taxable gain. Without invoices, they are hard to deduct.