Is the Interest on Your Mexico Home Loan Tax Deductible? Here's the Math
Taxes and your Mexico home
Picture a $1.2 million villa in Punta Mita with $660,000 financed at a fixed rate. For a buyer who itemizes, the interest on that MoXi® loan can come off their U.S. taxes the same way interest on a place in Scottsdale or Park City would, because a home in Mexico can count as a second home under U.S. rules. For a lot of buyers, financing the Mexico home directly also comes out ahead of pulling equity from the house they already own.
MoXi does not provide tax advice.
This article is for general education only. The examples are illustrative, and your situation will be different. Talk to your CPA or tax advisor before making any decision based on it.
The short version
If you itemize, the interest on up to $750,000 of combined mortgage debt on your main home and one second home is deductible, and that second home can be in Mexico.
A loan secured by the Mexico property can count toward that limit. A HELOC or cash-out refinance on your U.S. house used to buy in Mexico generally can't.
If you rent the home out and keep your own use low, the interest moves to Schedule E and is deducted against your rental income, outside the $750,000 limit altogether.
How the rule works
If you itemize, you can deduct interest on up to $750,000 of mortgage debt used to buy or improve your homes ($375,000 if you're married and filing separately). That limit was made permanent in 2025, so you can plan around it with some confidence.
The $750,000 covers your main home and one second home combined, and the second home doesn't have to be in the United States. A villa in Punta Mita or a house in San Miguel de Allende can qualify, as long as the loan is secured by that property. Every MoXi loan is secured by the home itself through a guaranty trust, the fideicomiso de garantía, which is set up for exactly that purpose.
Meet our example buyer
Every example below uses the same purchase, which is close to a typical deal for the buyers we work with.
|
Home price
$1,200,000
|
Down payment
45%
|
|
MoXi loan
$660,000
|
Illustrative rate
9.0% fixed
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The 9% rate is for illustration only. Your advisor can give you current pricing.
If your home in the U.S. is paid off
This is the cleanest case, and it's a common one among our buyers. Your full $750,000 limit is available, and the entire MoXi loan fits under it.
| Loan | Balance | Rate | Annual interest |
|---|---|---|---|
| Primary home (U.S.) | $0 | n/a | $0 |
| MoXi loan (Mexico) | $660,000 | 9.0% | $59,400 |
| Deductible interest | $59,400 | ||
All $59,400 comes off your taxable income. In a 35% federal bracket, that's roughly $20,790 a year that stays with you.
If you carry a large mortgage at home
Once your combined debt passes $750,000, the IRS prorates. You can't assign the limit to whichever loan has the higher rate. Instead, you add up all your mortgage interest and deduct the share that matches $750,000 out of your total balance.
Say you owe $1.2 million on your primary at 3%, like a lot of people who bought or refinanced in 2020 or 2021.
$1,860,000 in combined mortgage debt
About 40% of the total debt sits under the limit, so about 40% of all your mortgage interest is deductible.
| Loan | Balance | Rate | Annual interest |
|---|---|---|---|
| Primary home (U.S.) | $1,200,000 | 3.0% | $36,000 |
| MoXi loan (Mexico) | $660,000 | 9.0% | $59,400 |
| Total | $1,860,000 | $95,400 | |
| Deductible interest (40.3% of $95,400) | $38,468 | ||
Your primary mortgage is already over the limit on its own, so without the Mexico loan you would deduct about $22,500 of its interest. Adding the MoXi loan raises your deduction to $38,468, which is almost $16,000 more each year. If you borrowed against your primary to buy in Mexico instead, you would stay at $22,500, because that new interest doesn't qualify.
MoXi vs. a HELOC or cash-out refi
Buyers with a smaller mortgage at home often think about pulling equity out of their primary to buy in Mexico. The tax treatment is where that plan runs into trouble. Interest on home equity debt is only deductible when the money is used to buy, build, or substantially improve the home that secures the loan, so a HELOC on your U.S. house used to buy in Mexico generally produces interest you can't deduct.
And if you got lucky and locked in a 3% mortgage on your primary home, you already know you won't see that rate again. A cash-out refi means giving it up on your entire balance, not only on the new money. A HELOC lets you keep it, but it adds a variable rate tied to your house.
| How you borrow | Annual interest | Deductible | After-tax cost* |
|---|---|---|---|
| MoXi loan on the Mexico home, keep your 3% primary | $68,400 | $53,438 | $49,697 |
| Cash-out refi of your primary to $960,000 at 6.5% | $62,400 | $19,500 | $55,575 |
| $660,000 HELOC on your primary at 8% | $61,800 | $9,000 | $58,650 |
*Assumes a 35% federal bracket and that you itemize. Rates are illustrative. State taxes not included.
The MoXi loan carries a higher rate on paper and still costs about $5,900 to $9,000 less per year once taxes are counted. You also keep your 3% mortgage, you avoid a variable-rate line of credit, and your house in the U.S. stays out of the deal entirely.
Planning to rent it out?
Plenty of our buyers rent their place in Mexico when they aren't using it, and for many of them the tax picture gets even better.
The IRS looks at how many days you use the home yourself. If your personal use is 14 days or less a year, or 10% or less of the days it's rented (whichever is greater), the home is treated as a rental property instead of a second home.
In that case your mortgage interest goes on Schedule E and is deducted directly against your rental income, and it doesn't count toward the $750,000 limit at all. If you already carry a big mortgage at home, that makes a real difference. Your other costs go on Schedule E too, including property management, HOA fees, insurance, predial (Mexico's property tax), repairs, and depreciation on the building.
| How you use the home | How the IRS treats it | Where the interest goes |
|---|---|---|
| Personal use only, or rented 14 days or fewer | Second home. Short-term rent is generally tax-free. | Itemized deduction, counts toward the $750k limit |
| Rented, and you use it more than the 14-day / 10% threshold | Second home that's also rented | Split between Schedule E (rental days) and itemized (personal days) |
| Rented, and your personal use stays under the threshold | Rental property | Schedule E, against rental income, outside the $750k limit |
There are a few catches worth knowing about. Rental losses can be limited by the passive activity rules, depreciation on foreign rental property runs over 30 years, and Mexico taxes rental income too, although U.S. foreign tax credits can offset some of that. This is where a CPA who works with cross-border owners earns their fee.
What to bring to your CPA
✓Your closing documents, including the fideicomiso showing the loan is secured by the property.
✓Your annual interest statement from MoXi, plus your primary mortgage statement.
✓The date you took out your primary mortgage, in case it's grandfathered under the older limit.
✓A log of the days you used the home and the days it was rented, if you rent it.
A few details worth knowing
You have to itemize. Most buyers at this price point already do, but if the standard deduction is larger for you, this won't change your tax bill.
Older loans get more room. Mortgages taken out before December 16, 2017 are grandfathered at a $1,000,000 limit, which helps if you've had your primary loan for a while.
The real math uses averages. The IRS works from your average balances over the year. The numbers in this article are simplified so they're easier to read.
Quick answers
Can I deduct mortgage interest on a home in Mexico?
Often, yes. If you itemize and the loan is secured by the Mexico home, it can be treated as your second home under U.S. rules, within the $750,000 combined limit.
Can I apply the $750,000 limit to my higher-rate loan first?
No. When combined debt is over the limit, the deduction is prorated across all of your mortgage interest.
Is HELOC interest deductible if I use it to buy in Mexico?
Generally not. HELOC interest is only deductible when the money buys, builds, or substantially improves the home that secures the HELOC.
What if I rent the home out?
If your personal use stays under the 14-day or 10% threshold, the home is treated as a rental and the interest is deducted against rental income on Schedule E, outside the $750,000 limit.
Buying in Mexico?
Run your own numbers, then bring them to your CPA.
MoXi offers 30-year fixed-rate U.S. dollar mortgages for U.S. citizens and permanent residents buying or refinancing in Mexico. Our rate calculator gives you a real range in a couple of minutes, and an advisor can walk you through getting pre-approved.
See your rate rangeAlso worth reading: what goes into closing costs on a financed home in Mexico.
MoXi®
A Global Homeownership Company
Disclaimer: MoXi does not provide tax, legal, or accounting advice. This content is for informational purposes only and is not a substitute for advice from a qualified tax professional. Rates and figures are hypothetical examples and are not an offer of credit. All loans are subject to credit approval and program eligibility.
MoXi® funds and services loans in USD and is a regulated mortgage company in Mexico, with compliance maintained throughout the life of your loan.
If you are weighing a purchase or refinance in Mexico, a short discovery call is the fastest way to get clear answers for your situation.
