| July 06 2010
The North American Free Trade Agreement (NAFTA) treaty of 1994 opened many opportunities for Americans and Canadians to buy and own real estate in Mexico. Mexico is an exciting place to consider retirement living, a vacation home or even a permanent, principal residence for those who live close to the border between Mexico and the USA.
There are a few things you need to take into consideration when planning purchases of condominiums or single family dwellings:
1. Select the community that fits you. How will you be traveling to this location, by air, boat or car?
2. Examine the neighborhood to see the community services near by, as well as how water, electricity and other utilities are delivered to your potential home.
3. Understanding the titling and use of a Fideicomiso. Mexican laws do not allow foreigners to directly own property within certain restricted zones, defined as within 100 kilometers (approximately 62 miles) of the border area, and within 50 kilometers (approximately 31 miles) of the coastal areas. In these restricted areas, foreigners must have a Mexican Bank Trust, called a Fideicomiso, hold title of the property for you.
4. Because of holding title in a foreign trust, Americans must file form 3520A with the Internal Revenue Service every year, as you would be a grantor or a beneficiary of a foreign trust. There are other IRS requirements if you have a Mexican bank accounts or other accounts outside the USA, so be sure to have a competent tax professional well versed in foreign taxes on your team of advisors.
5. Many American real estate brokers have offices in Mexico as well as American mortgage companies, making it easier to do business.
6. For retirees who choose to live year round in Mexico, you can continue to receive Social Security benefits, but unfortunately, you cannot use Medicare to cover health care. You can use private American issued health insurance. If you give up your residency in the USA, and then later return, you will need to re-establish residency in order to reinstate your Medicare coverage. For this reason, most Americans return to the USA every year and maintain residency in the USA. There is public health insurance in Mexico that Americans and others can purchase. It is interesting to note: you can maintain your citizenship in the USA without having residency. The 50 different States have different and sometimes difficult hoops to jump through to sever residency.
With nearly 2,000,000 Americans now living full time in Mexico, many real estate developments are catering to Americans. Other services, such as medical and dental care, long term care, and others, are very affordable for retired Americans, and are often times provided by Americans who operate professional practices and businesses in Mexico. There are more retirement communities being established near resort areas, and in other areas that are now becoming new tourist destinations.
Retiring and living outside the USA has many benefits and challenges. Similar to people retiring and moving to a State in the USA with lower costs of living (and possibly no state income taxes such as Tennessee, Nevada, Idaho, or Florida), living outside the USA can have lower costs overall. It’s worth looking into.
