Puerto Rico is the one place where an American can live under the US flag and largely step outside US federal income tax. Become a bona fide resident and your Puerto Rico income drops out of your US return. Add an Act 60 investor decree and your interest, dividends and gains can be taxed at 0% or 4%.
This guide covers Puerto Rico tax for people moving there in the 2026 tax year: the Act 60 deadline, the three bona fide residence tests, income tax rates, freelancing, crypto, payroll taxes and filing. US citizens can move without a visa. Everyone else needs US immigration status.
The key question is simple. Where does your income come from? Puerto Rico taxes its residents on worldwide income, but only income from Puerto Rico escapes US federal tax.
What's changed: Act 38-2026, signed in March 2026, extends the resident individual investor programme to 2055. Decree applications filed by 31 December 2026 keep 0% on interest, dividends and post-move gains until the end of 2035. Applications from 1 January 2027 pay a flat 4%, and new applicants must not have lived in Puerto Rico in the six years before the move. A second phase of tax reform, Senate Bill 912, would cut income tax with a 0% band up to US$12,500 and a 33% top rate from US$150,000. Proposed, not law: the Financial Oversight and Management Board said in January 2026 that it could not support the rate cuts.
📋 Puerto Rico tax at a glance for 2026
Topic | Details |
|---|---|
Tax system | Worldwide income for Puerto Rico residents. Bona fide residents leave Puerto Rico income off their US federal return |
Top income tax rate | 33% above US$61,500, after a US$3,500 personal exemption |
All-in on a US$100k salary | About 28% (single, including US Social Security and Medicare) |
Foreign income | Taxed by Puerto Rico. Income from outside Puerto Rico can also be taxed by the US, with credits both ways |
Dividends, interest, capital gains | With an Act 60 decree: 0% until 2035 if you apply by 31 December 2026, then 4% for new applicants. Otherwise preferential rates |
Crypto gains | Covered by the decree: 0% or 4% on gains after the move |
Residence at a glance | Getting in: moderate (presence, tax home and closer connection tests). Leaving: moderate, with a 10-year rule on gains from before the move |
Double tax treaties | None of its own. US treaties don't generally apply |
The Act 60 investor decree and the 2026 deadline
Why are so many investors moving before the end of 2026? Because the date you file your decree application now decides which deal you get.
Image 1 — apply by 31 December 2026 or pay 4% instead of 0%
The resident individual investor decree comes from the Puerto Rico Incentives Code (Act 60-2019), which replaced Act 22 of 2012. It's granted by the Department of Economic Development and Commerce (DDEC) and only covers people who become Puerto Rico residents. It has two versions since Act 38-2026:
Applied for by 31 December 2026: interest and dividends earned after you become resident are fully exempt from Puerto Rico income tax until the end of 2035. So are gains on investments that build up after the move.
Applied for from 1 January 2027: the same income is taxed at a flat 4% until the end of 2055, unless another law gives a lower rate. You must show you weren't a Puerto Rico resident for at least six years before moving.
Gains from before the move: in both versions, the part of a long-term gain that built up before you arrived is taxed at 5% if you sell more than ten years after becoming resident. Sell sooner and the normal rules apply.
Existing decree holders keep their terms, and can ask to switch to the 4% version if they want the longer horizon to 2055.
The decree comes with conditions. You must buy a home in Puerto Rico as your main residence within two years of getting the decree. For applications from 2027, the title must be registered, or pending registration, in your name, jointly with your spouse or in a qualifying trust. You also give at least US$10,000 a year to non-profits: US$5,000 to listed child poverty organisations, at least US$2,500 to the Special Fund for Social Equality and the rest to other certified non-profits. You prove it in your annual report to the DDEC.
👉 Act 38-2026 (House Bill 505): the 4% rate, the 2026 cut-off and the 2055 extension (in Spanish)
👉 DDEC Circular Letter 2026-001: the annual donation for resident investors (in Spanish)
👉 Puerto Rico Incentives Code (Act 60-2019), English translation
How US federal tax works for Puerto Rico residents
Puerto Rico has its own tax system, run by the Department of the Treasury (Hacienda). Under section 933 of the US Internal Revenue Code, an individual who is a bona fide resident of Puerto Rico for the whole tax year excludes income from Puerto Rico sources from US federal income tax. Pay from the US government is the exception.
Income from outside Puerto Rico is different. Dividends from US companies, US interest and a pension from another country stay within US federal tax. Puerto Rico taxes them too, and each side gives a credit for the other's tax.
If you're not a US citizen, US rules still apply to you. A foreign national counts as a bona fide resident by meeting the US substantial presence test with Puerto Rico in place of the United States. Under section 876, a foreign national who is a bona fide resident for the whole year is then taxed at the normal US rates, with the same section 933 exclusion for Puerto Rico income.
👉 US Code: section 933, income from Puerto Rico
👉 US Code: section 876, foreign nationals resident in Puerto Rico
Becoming a bona fide resident, and how you stop
To be a bona fide resident of Puerto Rico for US purposes, you must pass three tests for the tax year:
Presence: usually at least 183 days in Puerto Rico in the year. Other routes include 549 days over three years with at least 60 in each year, or no more than 90 days in the US. Foreign nationals use the substantial presence test instead.
Tax home: you don't have a tax home outside Puerto Rico at any point in the year. Your tax home is your main place of business or work.
Closer connection: you don't have a closer connection to the US or another country than to Puerto Rico. Where your home, family and belongings are all count.
The closer connection test is the one people fail. A home or family base kept on the mainland can sink a claim even with 183 days on the island.
In the year you become or stop being a bona fide resident, you file Form 8898 with the IRS if your worldwide gross income is over US$75,000. The penalty for not filing is US$1,000.
Leaving is a matter of failing the tests. Puerto Rico has no exit tax. Watch the US 10-year rule, though: if you were a US citizen or resident in any of the 10 years before you became a bona fide resident, gains on investments you owned before the move aren't treated as Puerto Rico income, so they can't be excluded from your US return. A special election can treat part of the gain as Puerto Rico income.
👉 IRS Publication 570: bona fide residence tests, Form 8898 and the 10-year rule
Income tax rates for 2026
Puerto Rico's tax year is the calendar year. A single person deducts a personal exemption of US$3,500 (US$7,000 for a married couple filing jointly) and pays tax on the rest on this scale:
Puerto Rico income tax rates for 2026
Net taxable income | Rate |
|---|---|
Up to US$9,000 | 0% |
US$9,001 to US$25,000 | 7% |
US$25,001 to US$41,500 | 14% |
US$41,501 to US$61,500 | 25% |
Over US$61,500 | 33% |
Source: Hacienda, instructions for the 2025 individual income tax return. The same scale applies in 2026 unless the tax reform bill is passed.
Interest, dividends and long-term capital gains are taxed at preferential rates on a separate schedule (Schedule A2), whether or not you have a decree. An alternative basic tax can apply once net income reaches US$25,000.
👉 Hacienda: instructions for the 2025 individual income tax return (in Spanish)
👉 Puerto Rico Senate: hearing on the tax reform bill, Senate Bill 912 (in Spanish)
Worked example
You're single, a bona fide resident, and earn a salary of US$100,000 from a Puerto Rico employer in 2026.
After the US$3,500 exemption, your taxable income is US$96,500 and your Puerto Rico income tax is US$19,980.
You pay 7.65% US Social Security and Medicare (US$7,650) and US$27 of disability insurance.
Your all-in bill is about US$27,660, or 27.7% of your salary. Because the salary is Puerto Rico income, there's no US federal income tax on it.
Freelancing in Puerto Rico
Self-employed people pay Puerto Rico income tax on their net profit at the rates above. You may be able to choose an optional tax instead, charged on gross income with no deductions. Hacienda's 2019 guidance sets it at 6% where gross income is US$100,000 or less, as long as at least 80% of your gross income comes from services. Check Hacienda's current table before you rely on it, as higher rates apply to larger incomes.
On top of that, bona fide residents with self-employment income generally pay US self-employment tax: 15.3% on 92.35% of net profit, with the 12.4% Social Security part capped at US$184,500 in 2026. You report it to the IRS on Form 1040-SS.
On US$100,000 of profit, the optional tax and self-employment tax come to about US$20,130, or 20.1%. On the normal scale it's about 34.1%.
👉 Hacienda: the optional tax for the self-employed (in Spanish)
👉 Hacienda Circular Letter 19-02: the 6% optional tax (in Spanish)
Crypto, investments and pensions
How is crypto taxed in Puerto Rico? Act 60 lists "digital assets based on blockchain technology" among the assets that qualify for the investor decree. With a decree, gains on crypto that build up after your move are taxed at 0% until 2035 if you applied by 31 December 2026, or 4% if you applied later. Without a decree, gains fall under Puerto Rico's normal capital gains rules.
Two catches. Crypto you held before the move gets 5% only if you sell more than ten years after becoming resident. And the US 10-year rule can bring a pre-move gain into US federal tax.
Foreign pensions are taxed by Puerto Rico on the normal scale, and the decree doesn't cover them. A pension from outside Puerto Rico is also within US federal tax, with a credit for the tax paid to Puerto Rico.
US federal estate tax can still apply to a resident's estate, depending on citizenship.
Social security
Puerto Rico is inside the US Social Security and Medicare system. Employees pay 6.2% Social Security on wages up to US$184,500 in 2026 and 1.45% Medicare on all wages, with an extra 0.9% Medicare above US$200,000. Employers pay the same 6.2% and 1.45% again.
Puerto Rico adds its own disability insurance (SINOT). The total contribution is 0.6% of wages up to US$9,000 a year, and the employee's share can't be more than 0.3%, so at most US$27. Employers also pay Puerto Rico unemployment insurance.
Health insurance isn't included in our all-in figures.
👉 IRS: US employment tax in Puerto Rico
👉 Social Security Administration: 2026 wage base and tax rates
👉 Puerto Rico Department of Labor: SINOT disability insurance (in Spanish)
Double tax treaties
Does Puerto Rico have double tax treaties? No. As a US territory, Puerto Rico can't sign tax treaties with other countries, and US income tax treaties don't generally apply to it, because they define the United States without the territories.
Between Puerto Rico and the US, double tax is handled with credits. Puerto Rico gives a credit for US income tax, and the US gives a foreign tax credit for Puerto Rico tax on income it also taxes. A 1989 Tax Coordination Agreement covers information exchange and cooperation between the two tax authorities.
👉 IRS: US territories and tax treaties
👉 IRS: the US and Puerto Rico Tax Coordination Agreement
Moving to Puerto Rico: there's no digital nomad visa
Puerto Rico follows US immigration law and has no digital nomad visa. US citizens need no visa at all and can live and work there freely.
Everyone else needs US immigration status. Visa Waiver Program travellers can stay up to 90 days with an approved ESTA, but can't work. To live in Puerto Rico you need a US work visa, an investor or treaty visa, or a green card.
👉 US Department of State: the Visa Waiver Program
👉 US Department of State: employment visas
Who is Puerto Rico good for?
How does Puerto Rico compare for different kinds of mover? Ratings are relative to the 150+ countries TaxPilot covers, based on 2026 rules and the all-in cost including US Social Security and Medicare. We rate a single bona fide resident, with the Act 60 investor decree counted for retirees and investors.
☑️ Who is Puerto Rico good for? Tax ratings for expats in 2026
Expat profile | Puerto Rico rating | Why |
|---|---|---|
Employees | Moderate | About 27.7% all-in on a US$100k salary paid in Puerto Rico: Puerto Rico income tax of US$19,980 plus 7.65% US Social Security and Medicare. Puerto Rico wages are outside US federal income tax for a full-year bona fide resident. |
Freelancers (self-employed) | Moderate | About 20.1% all-in on US$100k if you can elect the 6% optional tax on gross income, plus 15.3% US self-employment tax on 92.35% of profit. On the normal scale it's about 34.1%. Act 60 business decrees aren't counted. |
Retirees | Good | About 5.9% on a US$40k foreign pension (Puerto Rico scale) plus US$20k of investment income at the 4% decree rate. The decree also means a US$10,000 yearly donation, so smaller investors may skip it. US federal tax and estate tax can apply to income and assets outside Puerto Rico. |
Crypto gains | Good (Excellent if you apply in 2026) | Act 60 treats blockchain digital assets as eligible assets. Gains after the move are taxed at 4% for decrees applied for from 1 January 2027, or 0% until 2035 if you apply by 31 December 2026. Pre-move gains follow separate rules. |
Investment income | Good (Excellent if you apply in 2026) | 4% on interest, dividends and post-move gains with a decree applied for from 2027, or 0% until 2035 for applications filed by 31 December 2026. The US$10,000 donation, and US tax on US-source dividends, can cost more than the tax. |
Digital nomad visa | Poor | No digital nomad visa. US citizens can move freely, but everyone else needs US immigration status, and visitors can't work. |
Filing and deadlines
Puerto Rico residents file an income tax return with Hacienda. The 2025 return was due on 15 April 2026, so expect the 2026 return to be due on 15 April 2027. If you elect the optional tax, you mark it on the return and attach Schedule X.
If you have income from outside Puerto Rico, you may also need to file a US federal return. Self-employed residents file Form 1040-SS for self-employment tax, and Form 8898 is due in the year your bona fide residence starts or ends if your income is over US$75,000.
Decree holders file an annual report with the DDEC each year, with proof of the US$10,000 donation and of ownership of their home.
Frequently asked questions
What is the Act 60 deadline in 2026?
Resident investor decree applications filed by 31 December 2026 keep 0% Puerto Rico tax on interest, dividends and post-move gains until the end of 2035. Applications filed from 1 January 2027 pay a flat 4% until 2055, under Act 38-2026.
How many days do I need in Puerto Rico to be a bona fide resident?
Usually at least 183 days in the tax year, although other presence routes exist, such as no more than 90 days in the US. You must also have no tax home outside Puerto Rico and no closer connection to the US or another country.
What are Puerto Rico's income tax rates in 2026?
After a US$3,500 personal exemption, income is taxed at 0% up to US$9,000, then 7%, 14% and 25%, with 33% above US$61,500. A reform bill to cut these rates is proposed, not law.
How is crypto taxed in Puerto Rico?
With an Act 60 investor decree, gains on crypto that build up after you move are taxed at 0% until 2035 if you applied by 31 December 2026, or 4% if you applied later. Crypto held before the move follows separate rules.
What does an Act 60 decree cost each year?
You give at least US$10,000 a year to Puerto Rico non-profits, including US$5,000 to listed child poverty organisations, file an annual report with the DDEC and must buy a home in Puerto Rico within two years of the decree.
Does Puerto Rico have a digital nomad visa?
No. Puerto Rico follows US immigration law. US citizens need no visa, while other nationals need US immigration status to live and work there.
Where to go next
Important information
This article is general information and does not constitute tax, legal, immigration or financial advice, and does not create a client relationship. Tax outcomes depend on travel history, income sources, treaty status and the law applying to the relevant year. Rates, thresholds and regimes change, and some measures described may be proposed rather than enacted; this article reflects our understanding as at the date of publication. Obtain advice from a suitably qualified professional before acting or refraining from action.
