Mexico annual tax return for employees: ISR, deductions and refund

Working in Mexico on a payroll? Your employer withholds income tax (ISR) every month, but the final bill is settled in the annual return. Unlike a US W-2 where you often just file, here the annual return recomputes your tax on the full year and on your personal deductions, and that decides whether the tax authority (SAT) refunds you or you owe a balance.

Enter what you earned, what was withheld and the expenses you can deduct. The calculator applies each deduction’s cap, the global limit and the annual tariff, and shows how much the deductions save you.

Income for the year is added up first, separating the exempt part of the aguinaldo (the legally required year-end bonus), the holiday premium and profit-sharing (PTU). Then personal deductions are subtracted: some fall under a global limit (the lower of five annual UMA and 15% of your income) and others, such as donations and retirement, have their own caps.

What remains is the taxable base, to which the annual article 152 tariff is applied, from 1.92% to 35%. The result is the year’s tax; if more was already withheld, the difference is a refund.

What the annual return is for employees

It is the year-end true-up of income tax for people paid wages. During the year the employer withholds using a monthly tariff; in the return the tax for the whole year is recomputed with the annual article 152 tariff and compared with what was withheld. If more was withheld, the SAT refunds the difference; if less, you pay it.

What expats and foreign employers should know

• Each deduction category has its own cap and requires an electronic invoice (CFDI) paid by card, transfer or bank cheque; cash does not count.
• A global limit applies: the lower of five annual UMA and 15% of income, but donations and retirement contributions sit outside it.
• School fees are deductible up to a cap per student that depends on the level.
• The aguinaldo, the holiday premium and the profit-sharing each have an exempt part defined in daily UMA.
• Amounts are in Mexican pesos. Foreign tax credits and treaty relief are outside this calculator.

Which personal deductions exist

• Medical, dental, psychology, nutrition and hospital costs.
• Funeral expenses, capped at one annual UMA.
• Real mortgage interest on a home loan up to 750,000 UDIS.
• Medical insurance premiums.
• School transport that is compulsory or included in fees.
• School fees from preschool to upper secondary, capped per student by level.
• Donations to authorised bodies, up to 7% of the previous year’s accumulable income.
• Voluntary retirement contributions, up to 10% of accumulable income and 5 annual UMA.

Common mistakes

• Deducting cash payments or costs without a CFDI.
• Ignoring the global limit and assuming everything is deductible.
• Putting the whole aguinaldo under salary: part of it is exempt.
• Deducting school fees without the cap per level and student.
• Deducting the full funeral cost: the cap is one annual UMA.
• Mixing up the tax year: 2025 income was declared in April 2026.

Limits of this calculator

• The annual tariff is the one in Annex 8 of the 2026 miscellaneous tax resolution, for tax years 2025 and 2026, read from the official PDF. The global limit is confirmed by an SAT release; the other article 151 caps come from a secondary summary because the law text was not available to us. Check them.
• We do not calculate the employment subsidy or subtract it from the balance. If you received it, check your certificate.
• We do not verify the 750,000 UDIS mortgage ceiling, nor that the person who incurred a medical cost earned less than one annual minimum wage.
• It does not cover other regimes (fees, rental income, RESICO): people in RESICO cannot claim personal deductions.
• It does not decide whether you must file.
• The donations cap uses the previous year’s income you enter; if left empty, we use this year’s.

Notice

This is an estimate, not tax advice, and it does not replace the return you file on the SAT portal or a Mexican accountant. Check your CFDIs before filing.