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Tax Guide for Mexican Expats in the U.S.

Tax Guide for Mexican Expats in the U.S.

If you’re thinking of moving from Mexico to the United States, you probably have many questions. Will you, for example, pay income tax in the United States, and if so, how much? What forms do you need to submit? What will the Internal Revenue Service (IRS) think of your Mexican assets? Here are the key U.S. tax issues that Mexican expats should be aware of to make your migration go more smoothly.

U.S. Tax Responsibilities of Foreign Nationals

U.S. taxes for Mexican citizens are complex. For tax purposes, there are significant distinctions between how nonresident aliens and resident aliens are taxed. Nonresident aliens are only taxed on income earned in the United States.

U.S. Non-Resident Tax

Do non us citizens pay taxes? Unless a nonresident alien may claim a tax treaty benefit, a nonresident alien must pay taxes on all income earned in the United States to the IRS. This is also true for students. Failure to pay the correct tax can result in an unwanted tax bill when the person leaves the United States or compromise a future residency application.

In comparison to a resident alien, a nonresident alien has a different tax structure. If a tax treaty exists with the person’s home country, a nonresident foreigner (for tax purposes) may be eligible for specific tax relief. In most cases, a resident alien is ineligible for a tax treaty benefit. For tax purposes, resident aliens are taxed on their worldwide income.

If a foreign national has never resided in the U.S., generally:

  • F1 and J1 students are NRAs for five calendar years

  • J1 nonstudents are NRAs for two calendar year


If a foreign national has previously lived in the United States, they must take the Substantial Presence Test. This test assesses whether a person has spent sufficient time in the United States in the past three years to be considered “substantially present.” How many days in us to be U.S. tax resident? For tax purposes, a foreign person who has been in the United States for 183 days or more in the previous three years is considered a resident alien.

Federal Withholding Tax and Tax Treaties

A foreign national is subject to a standard flat rate of 30% federal withholding tax on U.S. source income in most circumstances. If the foreign national’s country of residency and the United States has a tax treaty, a lower rate, including an exemption, may be applicable. In most cases, the tax is deducted from the amount made to the foreign national.

A tax treaty is an agreement between the U.S. and another country’s government. Tax treaties are designed to prevent double taxation or having income taxed twice. Each treaty is unique, with its own set of exceptions. If a foreign national qualifies for a tax treaty benefit, there will be minimal or no withholding taken from a payment. To claim the benefit, the foreign national must have a U.S. tax identification number.

For further information on which countries have treaties with the United States, see IRS Publication 515, Withholding of Tax on Nonresident Aliens & Foreign Entities.

What Is the United States – Mexico Tax Treaty?

The tax treaty between the United States and Mexico was formed in 1992, with a protocol appended in 2003. The pact is to help stop double taxation for Americans living in Mexico and Mexicans living in the United States; however, the treaty does not exempt U.S. expats living in Mexico from filing U.S. taxes due to a “Saving Clause” in Article 1 (paragraph 3), which declares that the United States can tax its citizens as if the rest of the treaty did not exist.

The United States-Mexico Tax Treaty prevents double taxation on income and capital gains, however as previously stated, the benefits are limited for Americans living in Mexico due to a “Saving Clause.” However, the treaty ensures that no one pays more tax than the higher of the two tax systems, and it also specifies where taxes should be collected, which is typically determined by where income is generated.

Expats should use IRS form 8833 to claim a provision in the United States–Mexico Tax Treaty (other than U.S. tax credits).

Tax Identification Number (SSN or ITIN)

According to IRS regulations, foreign nationals must have either a Social Security Number (SSN) or an Individual Taxpayer Identification Number (ITIN) to enjoy any tax treaty advantages.

Social Security and Medicare Taxes

Unless an individual is eligible for an exemption, Social Security and Medicare (FICA) taxes are applicable to pay or wage payments made by U.S. employers to foreign national employees for services provided in the United States. A foreign national must meet the following criteria to be exempt from FICA tax:

Some Title
  • A nonresident alien for tax purposes

  • Present in the United States under an F, J, M or Q immigration status

  • Performing services following the primary purpose of the visa’s issuance (i.e. F-1 student working as a T.A.)

How to File an Income Tax Return with the IRS?

Nonresident and resident aliens must adhere to specific regulations when filing an income tax return with the IRS. For more guidance, you can check out IRS Publication 519, U.S. Tax Guide for Aliens.

What Are the Penalties and Sanctions?

Failure to file the correct tax returns, providing deliberately false or misleading representations on tax returns, or generally failing to comply with U.S. tax law can result in fines and penalties, including criminal liability. The regulations provide that a nonresident alien’s tax return deductions will be authorized “only if the nonresident alien timely files a true and accurate return for the taxable year.” This means that unless a timely and accurate tax return is completed, the tax will be levied on the nonresident alien’s gross income, regardless of any deductions or credits that may be available. When a foreigner applies to leave the nation, their tax compliance will be assessed.

Ines Zemelman, EA
Founder of TFX