Americans Slash Their Taxes…as Expats Overseas

In the United States, single-family home owners pay an average of $3,296 in property taxes a year. In some states—like New York, New Jersey, Massachusetts, Texas, Virginia, Connecticut, and California—the average is $7,000 a year.

By contrast, many overseas retirement havens have extremely low property-tax rates, which contributes to the relatively lower cost of living, in places like Belize, Mexico, and Nicaragua.

For example, in these three countries—which regularly get high marks in International Living’s annual Global Retirement Index—expats report they pay a small fraction of what they did in the U.S. in property taxes…

Belize

“Property taxes in Belize are ridiculously low when compared to those in the United States,” says Ann Kuffner, IL Belize Correspondent. “I’ve interviewed a number of expats who own three bedroom houses, on half-acre properties, with a view of the bay in Corozal, and with river views in the Cayo District. None of the expats I’ve interviewed pay more than $50 per year for property taxes in Belize. And those I’ve interviewed who own two-bedroom, two-bath beach front condos on the Cayes, with a Caribbean Sea view, pay less than $300 a year for property taxes.”

Annual Property Tax

Tax on property is very low in Belize. Depending on which part of the country your property is in, the rate will be about 1.5% of the assessed valuation. What makes the tax low is that the assessed valuation is usually very little; a consequence of government policy to encourage development. As a result, you can expect to pay less than $500 a year on most houses and condominiums, and in many cases, the annual tax will be under $100. Property taxes are assessed by the Belize government and are due on April 1 of each year.

Mark and Jackie Baker moved to Belize full time in 2014 from Arizona.  They live in Cristo Rey, a bucolic village in the Cayo District.

“Our land taxes are only $5 a year, so we pay five years at a time. Our property taxes in Arizona were $8,400 a year!” says Mark.

Capital Gains Tax

Capital gains tax does not exist in Belize.

Mexico

Property taxes in Mexico are infamously low, in stark contrast to the property taxes in the U.S. and Canada. It is quite common to have annual property taxes of $100 or less, and they seldom run higher than about $300.

Many U.S. citizens save thousands every year, on property tax, with a move to Mexico. Scottie and Jim Watson, 72 and 70, respectively, have lived in Playa del Carmen, for six years.

“It’s less expensive to exist down here,” says Jim, who says they pay $200 a year, in tax on their condo. “Instead of paying $6,000 to $8,000 in property taxes in the U.S..”

Annual Property Tax

The municipality of residence in each state sets the rate of each property. The average home or condo property tax may only be a few hundred dollars per year. Properties in rural areas may be assessed at less than $100 per year.

Expat Gary DeRose says, “My annual property taxes in Merida are $100. Compare that to the $11,000 I paid in San Francisco a decade ago.”

Capital Gains Tax

There are two ways to calculate capital gains tax in Mexico.

  1. 25% of the declared value of the transaction, or
  2. 30% of the net value—that is, the difference between the assessed values at the time you bought the property and when you sell it, taking into consideration the time the property was held, any improvements made, any commissions paid, and other allowable expenses.

Capital gains tax should be calculated both ways with the help of an accountant or notario (notary), and the lower rate paid.

Nicaragua

“The most unbelievable savings in Nicaragua comes in the form of taxes…or should I say…hardly any taxes”, says Bonnie Hayman, IL Nicaragua Correspondent. “My two-bedroom, two-bathroom, ocean-view home on half an acre, cost me just $141 this year, and it goes down every year.”

Annual Property Tax

In Nicaragua, the annual property taxes are paid to the municipal government and are approximately 1% of the municipal cadastral value of the property. Although, the cadastral value of the land is calculated at a considerably lower than the market value price of the land when you buy the house.

If the property value is less than $40,000 for urban houses, or if a rural house is 2.4 acres or less, you are exempted from these taxes. And farmland of up to nearly 51 acres is also exempt from real estate taxes.

Capital Gains Tax

Nicaragua taxes its citizens, residents, and non-residents on all income originating in the country. Capital gains are treated as ordinary taxable income. If you sell your Nicaraguan property, you will be liable for tax on your earnings, up to a maximum of 30%.

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