ISR income tax for individuals in Mexico 2026: complete guide

What is ISR?

ISR (Impuesto sobre la Renta — Income Tax) is the federal tax levied on the income of individuals and companies in Mexico. For individuals, it applies to virtually everything you earn: wages, professional fees, rental income, business profits, capital gains and even foreign-source income.

Unlike IVA (which is charged on consumption), ISR applies directly to your income. It is administered by SAT and regulated by the Ley del Impuesto sobre la Renta (LISR).

Who pays ISR in Mexico?

All individuals with income in Mexico are required to pay ISR, regardless of nationality. This includes:

• Employees — the employer withholds ISR monthly through payroll
• PFAE (independent professionals and business owners) — consulting, freelance services, commissions
• Landlords — residential or commercial property rental income
• Digital platform workers — Uber drivers, Airbnb hosts, MercadoLibre sellers
• RESICO — individuals enrolled in the Simplified Trust Regime
• Foreigners with income in Mexico — on all income from Mexican sources

ISR 2025 tax rates for individuals

ISR for employees, PFAE and landlords is progressive: higher income means a higher rate. The annual tariff applicable to fiscal year 2025 (declared in 2026) is:

Source: Article 152 LISR tariff applicable to fiscal year 2025. Amounts in Mexican pesos, annual. Always confirm exact figures with SAT or a qualified accountant for your specific situation.

How is ISR calculated?

The basic annual ISR calculation follows this formula:

Practical example: employee with $300,000 MXN annual income

• Annual income: $300,000 MXN
• Personal deductions (medical, school, AFORE): $25,000 MXN
• Tax base: $275,000 MXN
• Applicable bracket: lower limit $185,852.58 → fixed fee $19,696.86 + 21.36% on excess
• ISR determined: $19,696.86 + ($275,000 − $185,852.58) × 21.36% ≈ $38,725 MXN
• If employer already withheld $36,000 MXN → balance due: ~$2,725 MXN

This calculation is performed automatically on the SAT portal when you file your annual declaration. Your employer's withholding data is pre-loaded.

ISR by tax regime

Employees (wages and salaries)

Your employer is responsible for withholding and remitting ISR monthly to SAT. At year-end, the annual declaration produces a definitive calculation — if you overpaid you receive a balance in your favor, if you underpaid there is a balance due.

If you worked for two or more employers in the same year, filing an annual declaration is mandatory, as each employer calculates withholding independently and a balance due is common.

PFAE — Independent professionals and business owners

If you issue invoices for professional services or run your own business under the general regime, you must:

• File monthly provisional ISR payments (by the 17th of each month)
• Keep accounting records and issue CFDI invoices for all income
• File an annual declaration and reconcile with actual income minus deductible expenses
• Keep your e.firma SAT valid for declarations and significant-amount procedures

RESICO — Simplified Trust Regime

RESICO offers very low flat rates on collected income (no expense deductions required):

RESICO is attractive when you have few deductible expenses. If your expenses are high (40–50%+ of income), the general PFAE regime may result in lower overall ISR. Read our RESICO registration guide to compare.

How to legally reduce your ISR

1. Personal deductions (annual declaration)

You can deduct up to $161,660 MXN per year (or 15% of income, whichever is less) in:

• Medical, dental and hospital fees with CFDI invoices
• Health insurance premiums
• Real mortgage interest
• Voluntary AFORE contributions
• School tuition (with limits per education level)
• Funeral expenses for direct family members

See the complete guide to deductible expenses to ensure you do not miss a single deduction.

2. Voluntary AFORE contributions

Additional contributions to your AFORE retirement fund are deductible and reduce your ISR tax base.

3. Donations to authorized institutions

Donations to SAT-authorized charitable organizations are deductible up to 7% of your prior-year income.

What happens if you do not pay ISR?

• Surcharges: 0.98% monthly on the amount owed, plus inflation adjustment
• Fines: $1,810–$45,750 MXN for omission or late filing
• RFC restriction: cancellation of digital stamps needed to issue CFDI invoices
• SAT audit: review of multiple fiscal years

Read our article on SAT fines in Mexico for a complete breakdown of penalties.

Frequently asked questions

Do foreign freelancers in Mexico pay ISR?

Yes. If you have temporary or permanent residency in Mexico and provide services here — even to foreign clients — your income has a Mexican source and is subject to ISR. See our guide on receiving international payments in Mexico without tax problems.

When do I start paying ISR?

From the first month you receive income. Employees have it withheld from the first paycheck. PFAE and landlords must file their first provisional payment by the 17th of the month following the first month of activity.

Can I credit taxes paid abroad against my Mexican ISR?

Mexico has tax treaties with several countries to avoid double taxation. If you already paid taxes on the same income abroad, you may be able to credit that amount against your Mexican ISR up to what would have been due in Mexico. This is a specialized area — consult an accountant for your specific situation.