What are authorized deductions?
When calculating monthly provisional payments of Mexico's Income Tax (ISR — Impuesto sobre la Renta), individuals who operate a business or provide professional services may deduct a range of expenses that are directly tied to the delivery of their services or business activity.
Unlike personal deductions, authorized deductions cover costs that are strictly necessary to generate income in the course of running a business or professional practice.
Types of authorized deductions
Operating expenses
- Rent and maintenance of your business premises or office
- Utilities: electricity, water, telephone, and internet at the workplace
- Wages and salaries of employees, including IMSS (social security) contributions
- Stationery and office supplies
- Courier services, security, and cleaning
- Advertising materials and promotional expenses
Vehicle expenses
Fuel and vehicle maintenance costs are deductible when the vehicle is used exclusively for business or professional purposes. Payment must be made through one of the following methods:
- Nominative (payee-identified) check
- Credit or debit card
- Authorized electronic wallet (monedero electrónico)
Capital asset investments
Investments in capital assets are deducted annually at the rates set by law:
- Computer equipment and technology
- Office furniture and equipment
- Buildings and improvements
- Work vehicles
Professional fees
Fees paid for the following professional services are deductible:
- Lawyers
- Accountants
- Designers
- Consultants and other specialists
Training and development
Courses and training programs that increase the productivity of the taxpayer or their employees are deductible.
Financing costs
Interest on loans taken out to invest in the business is deductible, provided the borrowed funds were used directly to generate income.
Local taxes
State and municipal taxes on business or professional activities are deductible when they relate directly to the taxable activity.
Goods and inventory
Purchases of merchandise, raw materials, semi-finished goods, and finished products used in the business are deductible.
Mandatory requirements for all deductions
Tax documentation
The only valid form of tax documentation in Mexico is the Electronic Invoice (CFDI — Comprobante Fiscal Digital por Internet). Vendors are required to issue the CFDI within 24 hours of the transaction.
All deductions must be supported by a CFDI that meets the requirements set out in Articles 29 and 29-A of Mexico's Federal Tax Code (Código Fiscal de la Federación).
Actual payment
Expenses must have been actually paid within the fiscal year being reported.
Strict necessity
Expenses must be strictly essential to earning the reported income. Any cost with no direct connection to the business activity is not deductible.
Payment method
| Amount | Accepted payment methods |
|---|---|
| Under $2,000 MXN | Cash, check, wire transfer, card |
| Over $2,000 MXN | Electronic wire transfer, nominative check, credit/debit card, electronic wallet |
Deadline
All deduction requirements must be met no later than December 31 of the corresponding fiscal year.
Recommendations
Properly managing your authorized deductions requires consistent attention throughout the entire fiscal year. Failing to meet the requirements results in disallowed deductions and incorrect tax calculations.
At SOLPROAM, we help you maintain proper control of your authorized deductions all year long. Contact us to receive professional tax guidance.