The 35% blind deduction: the system's best deal for landlords (if you know when to take it)

The rental (arrendamiento) regime hides the most generous option in the system for individuals: subtract 35% of your income without documenting a single peso, plus the full property tax (predial) — the so-called optional or "blind" deduction (art. 115, second paragraph, of the LISR, the income tax law). For the typical landlord, whose actual expenses rarely reach 20% of the rent, it is free money by legislative design. And yet half of all landlords don't even know it exists, and the other half apply it without ever having run the comparison.

The two routes of art. 115

Route A — actual deductions: property tax, maintenance and upkeep expenses (not improvements, which are capitalized), real interest on loans taken to buy or build the property, wages and commissions paid, insurance premiums, and depreciation of the construction at 5% per year. Full formal requirements apply: CFDI (the digital tax invoice), payment methods, working papers.

Route B — blind deduction: 35% of rental income + the property tax paid, with nothing else to document. Zero invoices to chase, zero requirements to keep up with, zero argument in an audit over whether the maintenance was deductible or a capitalizable improvement — simplicity as a tax benefit in itself.

The comparison that decides (with real numbers)

An apartment rented at MXN $30,000 a month ($360,000 a year), property tax of $12,000. Blind: you deduct $126,000 + $12,000 = $138,000; taxable base $222,000. Actual: do your documentable expenses for the year — maintenance, insurance, and above all the 5% depreciation of the construction plus the interest if there's a loan — exceed $126,000? On paid-off properties in good condition, almost never. On recently purchased leveraged properties or newly built ones, the actual route can win thanks to interest and depreciation together. The practical rule: paid-off, stabilized property → blind; leveraged property or new construction → run the numbers every year, because the option is exercised — and can be re-evaluated — each tax year.

The nuances the 60-second summary leaves out

• VAT runs on a separate track: a rented residential home is VAT-exempt; commercial units, offices and warehouses are taxed at 16% — and there the landlord invoices with VAT, remits it, and how much they can credit depends on their own VAT-bearing expenses. The blind deduction is an ISR concept: it frees you from nothing on VAT.
• Furnished changes the game: renting a furnished residential home loses the VAT exemption — the detail that generates the most silent fines in executive apartments and Airbnb-style rentals (which, depending on the model, may also be business activity with services, not rental — a different regime, different rules, different platform withholding).
• Improvements aren't lost forever under the blind deduction: they are capitalized into the property's cost and you recover them via the deductions of art. 121 when you sell — another reason to keep every construction CFDI even if you deduct blind today.
• Withholding when you rent to legal entities: your corporate tenant withholds ISR (10%) from you — creditable against your provisional payments; it isn't an extra cost, but it is cash flow and reconciliation to watch.