Year-End Tax Planning Checklist for Cabo Property Owners (2026–2027)

Every November I sit down with my accountant and run through the same checklist. Not because I enjoy tax planning — nobody does — but because the difference between a Cabo property owner who plans and one who does not is easily $5,000–$15,000 per year in unnecessary taxes, penalties, or missed deductions. Here is the list.

The November–December Action Checklist

This is the order I follow. Each item has a specific deadline or reason for acting before December 31:

1. Reconcile Your 2026 Rental Income

Pull your full-year rental income report from your property management company. You need:

• Gross rental income by month (in both USD and MXN if you receive payments in both currencies)
• Management fees paid
• Cleaning fees, maintenance, and repairs
• Occupancy rate by month
• Any periods of personal use (this affects your deduction allocation)

Why now: your Mexican contador needs this data to prepare your SAT filing, and your US CPA needs it for Schedule E. If you wait until March, you are scrambling.

2. Decide Whether to Accelerate or Defer Expenses

December is your last chance to move deductible expenses into 2026 or push them to 2027:

• Accelerate into 2026 if: Your income was higher than expected, you want to reduce taxable rental income, or you have repairs and maintenance that were going to happen in Q1 2027 anyway. Schedule them now, pay before December 31, and deduct in 2026
• Defer to 2027 if: Your income was lower than expected (perhaps due to a slow rental season) and you do not need the deductions this year. Stack them into next year when your income may be higher

Common expenses worth timing: annual HOA assessments (some communities allow early payment), major appliance replacements, deep cleaning, repainting, AC servicing.

3. Verify Your Depreciation Schedule

If your Cabo property is a rental, you should be depreciating the building (not land) on your US tax return. Under Mexican tax law, residential buildings depreciate at 5% straight-line over 20 years. The IRS generally respects this for foreign property under the alternative depreciation system (ADS) which uses a 30-year schedule for residential rental, or you may use the standard 27.5-year MACRS schedule.

On a $750,000 property with a 70% building-to-land allocation ($525,000 building value), you are looking at:

• 27.5-year MACRS: $19,091/year in depreciation deductions
• ADS 30-year: $17,500/year

If you bought your Cabo property this year, make sure your CPA set up the depreciation schedule correctly. If you have owned for years and never depreciated, you can file Form 3115 (change in accounting method) to catch up — but act before year-end to implement the change on your 2026 return.

4. Gather FBAR and FATCA Data

Two separate filings, two separate thresholds, both with serious penalties for non-compliance:

FBAR (FinCEN Form 114):

• Trigger: You had signature authority over, or financial interest in, any foreign financial account that exceeded $10,000 at any point during 2026
• What counts: Your fideicomiso bank account if it receives rental income or holds funds. Your Mexican bank account if you have one for bill payments. Any MXN or USD account at a Mexican institution
• Deadline: April 15, 2027 (automatic extension to October 15)
• Penalty for non-filing: Up to $14,489 per violation (non-willful), up to $144,886 or 50% of balance (willful)

FATCA (Form 8938):

• Trigger: Total value of specified foreign financial assets exceeds $50,000 at year-end (single) or $100,000 (MFJ), or $75,000/$150,000 at any point during the year
• What counts: Same accounts as FBAR, plus any interest in a foreign entity (like a Mexican corporation if you own property through one)
• Penalty for non-filing: $10,000, plus $10,000 for each 30-day period of continued non-filing after IRS notice (up to $60,000)

November action: pull your highest balance for each Mexican account during 2026. If any single account or the aggregate of all accounts exceeded $10,000, you need to file FBAR. If the aggregate exceeds the FATCA thresholds, you need Form 8938 too. Most Cabo rental property owners trigger both.

5. Budget for January Predial Payment

Mexico's annual property tax (predial) resets every January, and most Los Cabos municipalities offer a 10–15% early payment discount for paying the full annual amount by January 31. But you need to have the funds ready — which means planning in December.

If your predial is paid by your property manager, confirm they are capturing the early payment discount on your behalf. Some management companies pay quarterly and miss the discount entirely. That is your money they are leaving on the table.

6. Review Insurance Before Renewal

Most Cabo homeowner insurance policies renew annually. If your renewal is in Q1 2027, December is the time to:

• Review coverage limits against current property values (have values increased?)
• Shop alternative carriers for better rates
• Verify your deductible makes sense given your risk tolerance
• Confirm hurricane and earthquake coverage is included (not all policies include both)

7. Confirm Your Mexican Tax Filings Are Current

If you earn rental income from your Cabo property, you should be making monthly provisional ISR (income tax) payments to the SAT. Many foreign owners are behind on these filings — either because their contador fell behind or because they did not know the obligation existed.

November is the time to verify:

• Are all 2026 monthly provisional payments filed and paid?
• Did your property manager withhold ISR on your behalf, and if so, do you have the constancias (withholding certificates)?
• Is your RFC (Mexican tax ID) active and in good standing?

Getting caught up before year-end avoids compounding penalties. The SAT charges surcharges (recargos) of approximately 1.47% per month on late payments, plus an inflation adjustment (actualización). A year of missed payments can grow 20–25% with penalties.

8. Assess Capital Gains Planning if You Plan to Sell in 2027

If selling your Cabo property is on the horizon, year-end planning matters significantly:

• Mexican capital gains tax: Approximately 25–35% of the net gain. The notario calculates and withholds this at closing. Deductions include documented improvements, inflation adjustments, and closing costs
• US capital gains tax: You will owe US tax on the gain, but receive a foreign tax credit for Mexican tax paid. If the Mexican rate exceeds your US rate, you may have excess credits to carry forward
• Timing strategy: If you close in early January vs late December, the gain falls into a different tax year on both sides. This matters if your income is significantly different between years

Gather documentation of every improvement you have made to the property — receipts, invoices, CFDI fiscal invoices. These reduce your taxable gain in Mexico. Many owners discover at selling time that they failed to keep improvement receipts, resulting in a higher tax bill. Start the file now.

9. Review Your Mexican Will and Fideicomiso Beneficiary

Year-end is a natural time to review your Mexican will and fideicomiso beneficiary designation. Life changes — marriage, divorce, births, deaths — can make your existing designations incorrect.

Verify:

• Your fideicomiso substitute beneficiary is current and correct
• Your Mexican will aligns with your US estate plan
• Your cross-border estate plan accounts for recent changes in both US and Mexican law

10. Organize and Back Up Your Documents

This is the boring one. It is also the one that saves you the most pain when April rolls around and your CPA wants your records. Before December 31, compile:

• All rental income statements from your management company
• Bank statements for every Mexican account
• Receipts for all property-related expenses (scanned and backed up digitally)
• Your fideicomiso annual fee receipt
• HOA payment records
• Insurance premium receipts
• Property tax (predial) receipts
• Any CFDI invoices issued by Mexican service providers

A cloud folder organized by year and expense category takes 30 minutes to set up and saves hours of scrambling in tax season.

Three Expensive Mistakes I See Every Year

1. Not filing FBAR. Most Cabo property owners with rental income trigger the $10,000 threshold without realizing it. The penalties are disproportionate to the offense — $14,489 for forgetting a form that takes 20 minutes to file. Do not be this person
2. Not depreciating the property. If you own a rental property in Cabo and are not claiming depreciation on your US return, you are leaving $17,000–$25,000/year in deductions on the table. And the IRS will depreciate it for you (phantom depreciation) when you sell, so you pay recapture tax on depreciation you never took. Lose-lose
3. Treating it as a vacation home when it is a rental. The IRS personal-use rules (14 days or 10% of rental days, whichever is greater) determine whether your property is a rental or a vacation home. The tax treatment is dramatically different. If you rented your property for 200 days and used it personally for 25 days, it is a vacation home under IRS rules — and your deductions are limited. Structure your personal use carefully

None of this is glamorous. Nobody buys a Cabo condo because they are excited about FBAR filings and depreciation schedules. But the owners who spend two hours in November running through this checklist consistently pay less tax, avoid penalties, and sleep better. That is worth the boring afternoon.