Compare taxes and see how much you save moving from Texas to Mexico
Texas residents pay $0 in state income tax while Mexican residents pay approximately $22,000 in ISR (Impuesto Sobre la Renta) income tax at $100,000 USD equivalent. Texas is one of the most tax-competitive states in the US — no income tax, no capital gains tax at the state level — while Mexico's progressive federal rates make its income tax higher than many assume. The critical consideration for Americans working remotely from Mexico is the 183-day tax residency rule: those spending fewer than 183 days in Mexico in a calendar year typically do not trigger Mexican tax residency, meaning Mexican ISR would not apply to foreign-source income. The US-Mexico tax treaty provides protection against double taxation for those who do establish Mexican residency.
No State Income Tax
Constitutional prohibition on state income tax — Texas residents pay no state-level personal income tax.
Federal Income Tax (ISR)
Federal progressive income tax (Impuesto Sobre la Renta) with brackets from 1.92% to 35%.
At $100,000 income:
Mexico's ISR (income tax) is approximately $22,000 at $100,000 USD equivalent. Texas has $0 state tax but US federal still applies. Many Americans work remotely from Mexico — Mexican tax residency rules apply after 183 days. US-Mexico tax treaty prevents double taxation for those who establish Mexican residency.
| Income | TX Tax | MX Tax | Savings | 10-Year |
|---|---|---|---|---|
| $50,000 | $0 | $5,500 | -$5,500 Mexico costs more | -$55,000 |
| $75,000 | $0 | $13,500 | -$13,500 Mexico costs more | -$135,000 |
| $100,000 | $0 | $22,000 | -$22,000 Mexico costs more | -$220,000 |
| $150,000 | $0 | $38,000 | -$38,000 Mexico costs more | -$380,000 |
| $250,000 | $0 | $72,000 | -$72,000 Mexico costs more | -$720,000 |
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Transfer Money Internationally →Mexico considers a person a tax resident if they spend 183 days or more in Mexico in any 12-month period (not necessarily a calendar year) or if they establish their primary home (casa habitación) in Mexico. Americans who stay under 183 days and maintain their primary home in the US (such as Texas) typically do not trigger Mexican tax residency. This means their US employer income remains subject only to US federal tax — not Mexican ISR. However, exceeding 183 days, renting a long-term apartment in Mexico, or registering for a Mexican RFC (tax ID) can all establish residency. It is essential to track days carefully and seek professional advice if you plan extended stays.
Yes — American citizens owe US federal income tax on worldwide income regardless of their country of residence. Even if you spend an extended period in Mexico and establish Mexican tax residency, you still must file a US federal return each year. The US-Mexico tax treaty and the foreign tax credit system prevent double taxation: Mexican ISR paid can be credited against the US tax liability on the same income. Americans in Mexico with Mexican bank accounts or financial assets must also comply with FBAR (FinCEN 114) and FATCA Form 8938 reporting requirements. A US expat tax specialist is highly recommended for those with both US and Mexican income obligations.
Mexico's Impuesto Sobre la Renta (ISR) is the federal income tax, administered by SAT (Servicio de Administración Tributaria). ISR is levied on the worldwide income of Mexican tax residents at progressive rates from 1.92% to 35%. Unlike many countries, Mexico has relatively few deductions available to salaried employees — personal deductions are limited. For a Mexican resident earning the equivalent of $100,000 USD, the ISR tax bill is approximately $22,000 USD. Mexico also has an annual ISR declaration (Declaración Anual) due in April each year, and monthly provisional payments are typically required for self-employed individuals.
Yes — the US-Mexico Double Taxation Convention (originally signed 1992, in force 1994) establishes comprehensive rules governing income taxation between the two countries. The treaty covers employment income, business profits, dividends, interest, royalties, and capital gains. For Americans establishing Mexican residency, the treaty ensures that taxes paid to Mexico can be credited against the US federal tax liability on the same income, preventing double taxation. The treaty also includes a 'saving clause' under which the US retains the right to tax its citizens as though the treaty did not exist — a standard feature of US tax treaties. Exchange of information provisions mean the two tax authorities share data on cross-border income.
Due to Texas's proximity, several Mexican cities have become popular bases for American remote workers. Mexico City (CDMX) offers a massive, cosmopolitan metropolis with world-class food, culture, and coworking infrastructure at a fraction of Austin or Houston costs. Guadalajara is Mexico's tech hub — often called 'the Silicon Valley of Mexico' — with a growing startup ecosystem. The Riviera Maya (Playa del Carmen, Tulum, Cancún) is popular for beach lifestyle and proximity to Cancún airport. Oaxaca attracts creatives and digital nomads seeking cultural immersion. San Miguel de Allende is a popular choice for retirees and professionals seeking a traditional colonial experience with a large American expat community.
Yes — Americans living in Mexico who establish tax residency there can claim the Foreign Earned Income Exclusion (FEIE) under IRS Form 2555, provided they meet either the Bona Fide Residence test or the Physical Presence test (330 days outside the US in a 12-month period). The 2025 FEIE exclusion is $126,500. For Americans earning under the exclusion amount who work exclusively in Mexico, FEIE can eliminate the US federal tax bill entirely. However, for higher earners or those earning US-source income (such as working remotely for a US employer), the interaction between FEIE, the foreign tax credit, and the US-Mexico treaty requires careful planning. Note: claiming FEIE typically requires establishing Mexican tax residency, which then triggers Mexican ISR obligations.
Mexico offers dramatic cost of living savings compared to Texas, particularly in housing and services. A comfortable apartment in Mexico City's desirable neighborhoods like Condesa or Roma can be rented for $800-$1,500 USD per month — comparable apartments in Austin or Houston cost $2,500-$4,000. Dining out in Mexico typically costs 50-70% less than equivalent meals in Texas cities. However, imported goods, electronics, and international services are often priced similarly or higher in Mexico due to import tariffs. Healthcare is available through private hospitals at a fraction of US costs, though quality varies. Americans in Mexico generally save 30-50% on total living costs compared to major Texas metros, partially offsetting the higher ISR tax burden for those who establish residency.