Quick Answer
Yes. Mexico allows deductions against rental income including: depreciation (5% per year for residential), property taxes, HOA fees, insurance, maintenance and repairs, property management fees, advertising costs, and fideicomiso annual fees. You can also deduct mortgage interest if applicable. Keeping detailed receipts and working with a Mexican accountant maximizes deductions.
Detailed Answer
Mexico offers a generous set of deductions for property owners earning rental income, making it a tax-friendly jurisdiction for vacation rental investors. Allowable deductions include 5% annual depreciation on the building value (excluding land), property taxes, HOA fees, homeowners insurance, property management fees, cleaning and maintenance costs, listing and advertising expenses, fideicomiso annual fees, and professional accounting fees. Mortgage interest is also deductible if you financed the purchase.
The 5% straight-line depreciation is particularly valuable — on a $400,000 condo where 70% of value is attributed to the structure, you can deduct $14,000 per year as a non-cash expense against rental income. Combined with operating deductions, many owners show minimal taxable income on their Mexican returns even while generating solid cash flow. This is something our clients consistently appreciate once they see the numbers.
To maximize these benefits, you need an RFC (Mexican tax ID) and a local accountant who files monthly or quarterly ISR returns on your behalf. The accounting fees — typically $100-$200 per month — pay for themselves many times over in tax savings. Our team connects every rental buyer with trusted bilingual accountants in Los Cabos. Explore more strategies in our FAQ hub or reach out directly.