Buying a house in the U.S. in your own name: the 40% mistake Mexican families keep making

The scene repeats every year in San Antonio, Houston and Miami: the Mexican family finds the house, likes it, and signs "the classic" — a deed directly in mom and dad's names. Nobody told them they just accepted two U.S. tax contingencies that can cost more than the house itself. Both are prevented with structure; neither is fixed cheaply afterward.

Contingency 1: the estate tax (up to 40% at death)

The United States levies an estate tax on assets situated within its territory. For its citizens and residents, the exemption runs into the millions and almost no one pays it. For the non-resident alien — your case — the exemption is laughable: 60 thousand dollars. Everything above that is taxed at a progressive rate reaching 40%. A $1.5 million house held directly in a Mexican's name can generate an estate-tax bill of hundreds of thousands of dollars — payable before the heirs can dispose of the property, with a U.S. filing in between.

Contingency 2: FIRPTA (15% withholding on sale)

When a foreigner sells U.S. real estate, the buyer is required, as a general rule, to withhold 15% of the gross sale price — not of the gain: of the full price, without deductions. The actual tax is trued up later on the return, but the cash-flow hit is immediate and the refund of the excess takes its time. There are narrow exceptions (a home the buyer will use, under certain amounts) and mechanisms to reduce the withholding, but the general rule is what it is.

The basic structure: get the individuals out of the U.S.

One proven alternative — not the only one, and not optimal for every case — works like this: you set up a Mexican entity (an S. de R.L., for example, also useful because of its U.S. treatment), which in turn sets up a U.S. LLC, and it's the LLC that buys the house. The family never appears as an owner in the United States — it is a partner in a Mexican entity.

The succession effect is the crown jewel: when the time comes to transfer, you don't transfer the house (an asset situated in the U.S.) but the partnership interests in the Mexican entity (an asset situated in Mexico). And in Mexico, inheritance is exempt from ISR for the heirs, and so is a gift between spouses, ascendants and descendants in a direct line (art. 93, fracs. XXII and XXIII LISR). The U.S. estate tax simply doesn't reach the transaction, because ownership of a foreign company is not an asset situated in the U.S.

The fine print the Instagram reel doesn't mention

• The U.S. operating income tax doesn't disappear. If the house is rented or sold at a gain, that profit is taxed in the U.S. regardless — the structure solves succession and order, not the income tax on U.S.-source income. Depending on the configuration (transparent LLC or corporation), rates, withholdings and filings change: that choice is the technical heart of the design.
• Mexico sees everything. The Mexican entity consolidates the effects in your jurisdiction: accounting, potential taxable income, and the reporting obligations for foreign structures. Done right, that's precisely what you want — every tax effect concentrated where you live and where the family exemptions protect you.
• Upkeep matters. A structure with no minutes, no accounting and no filings is a structure that crumbles when you need it most — in the audit or in the succession. The annual cost of keeping it alive is part of the entry analysis.
• Personal use of the house: if the family uses the entity's property without paying rent, there are deemed-dividend and market-value issues that are managed with contracts — a technical detail, a known solution, but one that has to be executed.