I have some property in Mexico I want to sell is there any way to limit the tax on the sale?

Answer 1

Yes, lower the sales price. Also, if you have held the property for more than 1 year it is long-term capital gain instead of short-term, and is taxed at a lower rate. Also, if you have to pay taxes in mexico on the gain you would report the gain and the mexican taxes paid on form 1116 and get a tax credit on some or all of the mexican taxes. Also, make sure you include in your cost basis the purchase price you paid when you bought the mexican property, any expenses you had to buy it in the first place, cost of any improvements you have put into the property, and lastly costs you incurred in selling it. But you would have to deduct from the cost, any depreciation you took on it if it was a rental property.

Answer 2

1. Cut your sales price.

2. Make sure you have owned the property for at least one year and one day as of the date of sale to have the gain treated as a long term capital gain and therefore taxed at a lower rate, normally 15%.

Important: The gain on the sale is fully taxable in the US. You will get a credit for any Mexican income taxes paid, however, so that will help at least a little bit. File Form 1116 to claim any credits for the Mexican taxes paid.