We know, it's not the most thrilling topic. But if you're going to send money to Mexico from the USA, take a moment to ensure you know whether your transfer will be taxed before you send it. You'll be happy you did!
December 14, 2020 — 7 min read
If you live in the United States and have family or friends in Mexico, you probably send money to them regularly. Or you may send money to the country every day because you run a business there.
You may know a thing or two about money transfers and how the charges vary greatly. Whenever you send money, you may pay a small fee or an outrageous one--it all depends on the money transfer service you use. But what you may not know are the taxes you’ll pay, or whether you’ll be taxed at all on gifted money.
This article goes into detail about money transfer taxes. You can refer to it every time you’re sending money from the US to Mexico.
Let’s get started.
Yes, Mexico does regulate large money transfers. But not always.
If the money you’re sending is:
Part of an estate
…then the recipient may not be required to pay taxes for it in Mexico.
Additionally, gifts to:
…are exempt from taxes.
If the money exceeds a certain amount, the recipient may have to report it as income when filing their yearly taxes. We mentioned that gifts to children, spouses, and parents are exempt from taxes, but gifts to siblings are not.
Also, don’t try to be tricky.
If you send money to someone who is exempt from paying tax so they can give it to someone who is not exempt, the government will tax the money if it finds out.
So, what is this “certain amount” where money transfers become taxable?
You must report large money transfers to the IRS if:
You’re sending more than $15,000 USD as a gift.
You’re sending money to a foreign account in your name that holds over $10,000 USD.
You’re a business sending more than $10,000 USD.
US laws require banks and financial institutions to report cash transactions into and out of the country. For money transfer companies, the reporting threshold may be as low as $1,000 USD. Banks are only required to report cash transactions that exceed $10,000 USD. This international money transfer reporting limit is set by the IRS. However, banks can report any transaction they consider suspicious, regardless of the amount. For instance, you’ll be reported if you try to split up payments to avoid hitting the $10,000 USD mark.
The US government pays a lot of attention to money entering and leaving the country. If you don’t report large sums of money you’re sending out of the US, you’ll be discovered and may have to pay stiff tax penalties or go to jail.
Banks and financial institutions in the United States process money transfers through numbering systems. This makes it easy for the government to keep track of funds even if the money is sent overseas.
The Bank Secrecy Act allows the IRS and the Department of Justice to scrutinize large money transfers to see whether any illegal activity has taken place. Individuals trying to avoid paying tax are discovered and deterred. The law also helps prevents illegal activities like money laundering, terrorism, and crime.
Yes, for certain amounts.
If you’re sending money for business purposes, you won't be required to pay taxes if the amount is less than $10,000 USD. But if you're sending more than $10,000, you’ll have to pay taxes. You’ll have to fill out a 8300 tax form. The form provides valuable information to the IRS and the Financial Crimes Enforcement Network (FinCEN).
If you often send money to someone as a gift--your wife, parent, or child--you can send up to $15,000 USD in one year. You won’t have to deal with the IRS about it. However, if you send more than $15,000 USD in cash or assets--stocks, a new car--in one year to one person, you’ll have to file a gift tax return. You’ll fill out a gift tax return form (IRS Form 709). It is your responsibility to file the gift tax return and pay the gift tax--not the recipient’s.
The recipient must include the money transfer when filing their income taxes. If they don’t, the government may charge them with tax evasion. However, if they can show that they failed to file the transfer by mistake, they will just pay a penalty and any taxes due. If they failed to report the transfer intentionally, they may be criminally charged.
When sending money to Mexico, there are 2 options you can use (hint hint, one will be better than the other):
When you use a reputable online money transfer service like Xe, you get very good rates. We recently upgraded our money transfers to Mexico, meaning that you can enjoy more competitive exchange rates, faster transfer times (we’ll get your money to Mexico in minutes), and no third-party transfer fees.
In addition, we send your money quickly and safely. Xe is regulated by FinCEN (The United States Financial Crimes Enforcement Network) and FINTRAC (The Financial Transactions and Reports Analysis Centre of Canada), and we adhere to regulatory measures in every country where we do business.
Over 1 million customers around the world love our service.
You can also send money to Mexico through your bank, but it will be more expensive. The process may also take several days--longer than you expect.
Banks charge numerous fees (and not all of them are obvious) for money transfers and don’t give you the best exchange rate. Your recipient will get fewer pesos, or you may have to top up money for them to get the amount you want.
No. Xe allows you to send as much money as you want.
However, it’s worth mentioning that if you’re making the money transfer online, you can only send up to $500,000 USD (or the equivalent in another currency). If you would like to send more than $500,000 USD, get in touch with our currency experts and they will take you through the entire process over the phone.
If you often send large sums of money to Mexico, you need a money transfer service that lets you do that easily. Xe gives you the best rate and we don’t charge any hidden fees. You’ll even see how much money the recipient will get upfront!
You can use our website or our mobile app to send money to Mexico. You can pay for the transfer via credit/debit card, ACH, or wire transfer. However, ACH and credit/debit card payments have a limit.
Most of our money transfers to Mexico are completed on the same day, within minutes.
And here’s another reason why you should use Xe.
When making international money transfers, it’s vital to use a reputable service provider as you’ll be safeguarded from potential scams.
It’s also important to check the exchange rate before making an international transfer because it determines how much money you can send. A money transfer service that offers great exchange rates, like Xe, allows you to send more pesos to Mexico. You also pay fewer dollars to transfer the money.
Xe makes sending money to Mexico easy. Open an account today and start sending money to your loved ones.