How Mexico Income Tax Works — ISR 2024
Mexico's personal income tax is called the ISR (Impuesto Sobre la Renta), governed by the Ley del ISR and administered by the SAT (Servicio de Administración Tributaria). The system uses 11 progressive brackets from 1.92% to 35% using a cuota fija (fixed base charge) plus a marginal rate — mathematically identical to standard marginal brackets. Employers withhold ISR monthly via payroll (retención ISR en nómina), and a reconciliation declaración anual is filed by April 30 of the following year.
| Annual Income (MXN) | Marginal Rate |
|---|---|
| MXN $0 – $8,952 | 1.92% |
| $8,953 – $75,984 | 6.40% |
| $75,985 – $133,536 | 10.88% |
| $133,537 – $155,230 | 16.00% |
| $155,231 – $185,853 | 17.92% |
| $185,853 – $374,838 | 21.36% |
| $374,838 – $590,796 | 23.52% |
| $590,797 – $1,127,927 | 30.00% |
| $1,127,927 – $1,503,902 | 32.00% |
| $1,503,902 – $4,511,707 | 34.00% |
| Above $4,511,707 | 35.00% |
- →Subsidio para el empleo: a government tax credit for low-income workers. Workers earning below approximately MXN$10,800/month receive a subsidy that can reduce or completely eliminate ISR — effectively making take-home pay higher than the gross minus tax would suggest.
- →IMSS (Instituto Mexicano del Seguro Social): employee contributions total approximately 2–3% of salary (health, disability/life, and pension employee share). Employer pays ~18–20% on top. AFORE (pension) receives separate contributions.
- →Deductions for individuals (declaración anual): medical fees, hospital expenses, dental, funeral costs, school tuition fees, mortgage interest on primary residence, voluntary pension contributions, and charitable donations — each with specific caps.
- →RESICO (Régimen Simplificado de Confianza): simplified regime for self-employed individuals earning under MXN$3.5M annually. Tax of 1%–2.5% on gross revenue — much simpler than standard ISR filing.
- →CFDI (Comprobante Fiscal Digital por Internet): Mexico's electronic invoicing system. All payroll transactions require a CFDI de nómina. Keep all medical/school/housing CFDI receipts for annual deduction claims.
- →Annual declaration (declaración anual): April 30 deadline for individuals. Pre-filled with employer CFDI data, IMSS, and bank interest. File online at sat.gob.mx using RFC + e.firma or contraseña.
- →VAT (IVA): 16% standard rate (8% in border zones). Most professional services and sales are subject to IVA — independent contractors must charge and remit IVA monthly.
Frequently Asked Questions
What is the subsidio para el empleo and who qualifies?
The subsidio para el empleo is a monthly tax credit that benefits workers earning below approximately MXN$10,841/month (about MXN$130,000/year). The credit is set by the government in a table and decreases as income rises. For workers earning around MXN$8,000/month, the subsidio can completely offset the ISR, meaning they pay zero income tax. Your employer applies the subsidio automatically in payroll — if the subsidy exceeds your monthly ISR, the difference is paid out as a cash addition to your payslip. It does not apply to self-employed income, only to salaries (sueldos y salarios).
How does the declaración anual work and do I have to file?
The annual tax return (declaración anual) for individuals is due by April 30 for the previous year's income. Employees who earned income from a single employer are not required to file if their employer already submitted their annual tax adjustment (ajuste anual). However, filing is beneficial when: you have medical, dental, tuition, or mortgage interest deductions; you had two or more employers during the year; you received other income (rental, investments, freelance); or you made excess tax payments. The SAT pre-fills much of the return with employer CFDI data, DIOT, and bank info — filing takes minutes via sat.gob.mx using your e.firma or contraseña.
What are the main personal deductions I can claim in Mexico?
Personal deductions (deducciones personales) for Mexican individuals include: (1) Medical, dental, hospital, and vision fees: no cap other than the overall deduction limit. (2) School tuition (colegiaturas): MXN$12,900–$24,500 per student depending on grade level (specific limits apply). (3) Funeral expenses: up to one annual minimum salary. (4) Mortgage interest on primary residence: interest from a qualifying bank loan — no cap. (5) Voluntary pension/AFORE contributions: up to 10% of income or MXN$153,483. (6) Charitable donations to registered donatarias autorizadas: up to 7% of prior year taxable income. All deductions require a valid CFDI (electronic invoice) — physical receipts alone are not accepted by SAT.
How does IMSS work and what do Mexican employees pay?
IMSS (Instituto Mexicano del Seguro Social) provides healthcare, disability, maternity, and retirement benefits. Employee contributions total approximately 2–3% of salary across multiple sub-categories: enfermedad y maternidad (health/maternity), invalidez y vida (disability/life), and aportaciones al retiro/cesantía (retirement). The employer pays a much larger share (~18–20%). AFORE (Administradora de Fondos para el Retiro) manages the individual retirement account — employee contributes 1.125% of integrated salary, employer 5.15%, and the government adds a fixed daily contribution. If you are self-employed, you can voluntary register with IMSS to access healthcare and build pension credit.