Photograph by Giles Ashford
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Frequently Asked Questions About Retiring to Mexico
March-April 2004
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What kind of medical insurance is
available—and how good is the medical care?
Medical care in the larger Mexican cities is comparable to care in the
U.S.—at one-quarter the cost. That's good, because Medicare pays for
nada outside the U.S. Foreign residents may opt to sign up for the Mexican IMSS
(Instituto Mexicano del Seguro Social) plan, which covers progressively more
over a three-year break-in period, costs only a few hundred dollars a year, and
is renewable for life. It has no age restrictions, but it won't cover
people with chronic conditions such as diabetes or heart disease. Relatively
inexpensive private Mexican or international medical coverage is also
available. Because of the reasonable costs, many people pay in full for office
visits while holding insurance in reserve for catastrophic situations. Finally,
it's a good idea to keep Medicare Part B coverage in effect so that you can
return to the U.S. in case of a major medical problem. For a few hundred
dollars per year, airlift insurance provides a safe and comfortable way back to
the U.S.
 
What if I want to work or start a business?
In order to operate a business, you must present your idea to the Mexican
immigration authorities for approval. Basically, the business must be
beneficial to Mexico and must furnish a service that is best provided by a
non-Mexican. If the immigration department approves the activities you plan to
carry out in the country, you will be able to obtain an FM-3 visa with a work
permit. Then it's time for a discussion with a Mexican lawyer about the
rest of the legal requirements, which will vary depending on what you want to
do. You will need a highly trained professional to help you navigate the
bureaucracy successfully. If instead of starting your own business you find a
position with a Mexican corporation, that company will sponsor you and help
arrange the work permit.
What are the rules for buying property in Mexico?
Anyone, even someone in Mexico on a tourist visa, may buy property outright
as long as the real estate is not inside the Restricted Zone (within 50
kilometers—about 31 miles—of the ocean, or 100
kilometers—about 62 miles—from a border). What you'll need is a
permit from the Ministry of Foreign Affairs. But otherwise, buying a house in
Guadalajara, Chapala/Ajijic, or San Miguel de Allende simply requires following
the normal procedures for Mexican real estate transactions, which you
can—and should—learn about by hiring a Mexican notario (a
lawyer who is qualified to monitor real estate transactions). Title insurance
is available and is strongly recommended. In order to buy on the coast, such as
in San Pancho or Sayulita, a foreign resident must set up a trust through a
bank, which becomes the owner of record. The trust beneficiary (the buyer) has
all the rights to "use, enjoy, and sell" the property, including the
right to take the profit on a property whose value increases, subject to
capital gains taxes.
What sort of taxes would I have to pay there?
The IRS requires every U.S. citizen to pay tax on income, regardless of
where that money is earned or where the citizen resides. If you live in Mexico
183 days of the year, you are also subject to Mexican taxation. U.S. taxpayers
who meet certain residency criteria may qualify to exclude up to $80,000 of
foreign earnings from U.S. taxes and may take a credit or a deduction for taxes
paid to the Mexican government. For more information, download IRS Publication
54, "Tax
Guide for U.S. Citizens and Resident Aliens Abroad," (PDF) or obtain
it by calling 800-TAX-FORM (800-829-3676). Property taxes vary by location in
Mexico, just as in the U.S., but they are much lower overall. A $300,000 house
in San Miguel de Allende may have an annual tax bill as low as $200 to
$300.
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