Brownsville Cross-Border Tax

Two Cities, One Region

Brownsville and Matamoros are joined by several international bridges, and many families live, work and own property on both sides. Foreign contractors also work on the region's large projects. BOMCAS handles cross-border tax for Brownsville clients remotely.

General treaty and Canada–U.S. points are on the Texas cross-border tax page; this one is about Brownsville and Matamoros.

U.S. Citizens and Residents With Mexican Income

Citizens and residents report worldwide income, including Mexican wages, rent and business income. Tax paid to Mexico can be claimed as a foreign tax credit, limited to the U.S. tax on that income. The U.S.–Mexico treaty helps decide which country taxes certain income first.

Maquiladora Managers

Managers and engineers who live in Brownsville and work at plants in Matamoros are paid Mexican wages, often taxed in Mexico. Because their home is in the United States, they cannot use the foreign earned income exclusion; they rely on foreign tax credits. Those paid partly by a U.S. company and partly by a Mexican one need careful records of which work was done where.

Living in Matamoros

U.S. citizens living in Matamoros and working in Brownsville remain subject to U.S. tax and may also be Mexican tax residents, taxed by Mexico on worldwide income. Credits in each country prevent most double tax.

Mexican Property

Rent from property in Mexico is reported on Schedule E, with depreciation. A sale is reported with the U.S. dollar basis. Mexican bank accounts count toward the FBAR threshold of $10,000.

Mexican Businesses

U.S. residents who own Mexican companies may file Form 5471 and report certain income under the controlled foreign corporation rules. Those with Mexican partnerships may file Form 8865.

Foreign Contractors on Big Projects

Foreign companies working on the LNG and space projects may have a permanent establishment in the United States and file U.S. returns. Their foreign employees working in Brownsville may owe U.S. tax under the treaty rules for their country.

Social Security

The United States and Mexico signed a social security agreement in 2004, but it has never entered into force. Workers who move between the two systems cannot combine credits.

Carrying Money Across the Bridges

Anyone carrying more than $10,000 in cash or similar instruments into or out of the United States must declare it to U.S. Customs and Border Protection. Splitting amounts to avoid the declaration is illegal. Transfers through banks are reported by the banks under their own rules.

Mexican Spouses

A U.S. citizen or resident married to a Mexican citizen who lives in Mexico can elect to treat the spouse as a U.S. resident and file jointly, which brings the spouse's worldwide income into the U.S. return. The spouse then needs an ITIN or Social Security number. Filing separately may be better when the spouse has significant Mexican income.

ITINs

Family members without Social Security numbers apply for ITINs with the return. We prepare the applications with the required documents.

Mexican Pensions and Benefits

Residents who worked in Mexico may receive IMSS pensions. The U.S.–Mexico treaty has its own article on which country may tax social security benefits, and we apply it to each payment before deciding what goes on the U.S. return. Records of each payment and any Mexican withholding make the return straightforward.

Common Filings

Form 1040 with foreign income.
FBAR and Form 8938.
Form 1116.
Forms 5471 and 8865.
Form 3520.
Form W-7.