You're working remotely from Mexico. Your employer is in the US. Where does your income get taxed — and by whom? The answer is more complicated than most digital nomad blogs admit. Here's the full picture for US citizens specifically.
Most digital nomad tax guides are written for people who can escape their home country's taxes by leaving. US citizens can't. America taxes its citizens on worldwide income regardless of where they live or work. This is citizenship-based taxation — and it means US digital nomads in Mexico face a tax obligation most of their non-American counterparts don't: a mandatory US tax return every year, no matter what.
Mexico uses a 183-day physical presence test to determine tax residency. If you spend 183+ days in Mexico in a calendar year, Mexico considers you a tax resident and expects you to pay Mexican income tax (ISR) on your worldwide income and register with SAT for an RFC number. Many digital nomads in Mexico try to stay under 183 days. Others cross the threshold and need to manage both tax systems correctly. The guide covers both situations.
If you're a W-2 employee working remotely in Mexico, the IRS taxes your income as usual. But Mexico's SAT may also have a claim once you become a Mexican tax resident (183+ days). Your US employer likely won't withhold Mexican taxes — that's your responsibility. The Foreign Tax Credit lets you offset Mexican taxes paid against your US bill. The guide covers how to manage withholding, quarterly payments, and avoiding penalties from both tax authorities.
Freelancers and independent contractors face additional complexity. The IRS charges self-employment tax (15.3%) on top of income tax. Mexico charges ISR plus potentially VAT (IVA at 16%) on services rendered. If you register under Mexico's RESICO regime (1-2.5% effective rate on gross income), your Mexican taxes will be low — but that means less Foreign Tax Credit to offset your US bill. The guide runs net-tax calculations for the most common digital nomad income levels between $40k and $120k. Read the full freelancing guide →
This is the central question for US digital nomads in Mexico. The FEIE excludes up to $130,000 of foreign earned income from US taxation — but it can't be used if you're also trying to claim the Foreign Tax Credit on the same income. The FTC lets you offset Mexican taxes paid dollar-for-dollar against your US bill. For most digital nomads in Mexico (where tax rates can be 10–35%), the right choice depends on your income level, whether you have a US employer or are self-employed, and your Mexico tax registration status. The guide has a decision flowchart. Read the double taxation guide →
If you open a Mexican bank account (you almost certainly will), you're subject to FBAR reporting if aggregate balances exceed $10,000 at any point during the year. FATCA Form 8938 adds a second layer at higher thresholds. Missing either one: $10,000 minimum penalty per year. Many digital nomads don't know this applies to them even if they're only in Mexico short-term. Read the full FBAR guide →
This is the grey area most digital nomads live in. Technically, working in Mexico — even for a foreign company, even remotely — may require a work permit under Mexican immigration law. In practice, enforcement is minimal for short stays. For digital nomads planning to stay long-term (6+ months) on a Temporary Resident Visa, the guide explains the work authorization options and the real-world risk level for each scenario.
Before leaving the US, check your state's rules. California, New York, and New Jersey are aggressive about continuing to tax former residents who retain ties to the state (bank accounts, driver's license, property). The guide covers which states require affirmative steps to terminate tax residency and what those steps are.
Educational content only — not tax or legal advice. This guide is an orientation document. Tax law is complex and individual situations vary. Always consult a qualified US expat CPA and a licensed local attorney before making financial, visa, or property decisions. Figures are verified as of the date shown and subject to change. Full disclaimer →