If you’re a resident of Puerto Rico, there are a number of income tax benefits that you need to be aware of. This post will discuss the most important income tax Puerto Rico benefits that residents can take advantage of. Keep reading to learn more!
Puerto Rico is a territory of the United States, which means that residents are subject to US income tax laws. However, Puerto Rico has its own set of income tax benefits that can save residents a lot of money on their taxes. Here are the top ten benefits:
Puerto Rico is a tax-free zone. This means that all income earned in Puerto Rico is exempt from US federal income tax. In addition, there is no capital gains tax in Puerto Rico, and there are no estate or inheritance taxes.
Puerto Rico offers generous exemptions for dividend and interest income. Residents of Puerto Rico are allowed to exclude up to $100,000 of dividend and interest income from their taxable income each year. This can save residents a lot of money on their taxes! The exemption for capital gains applies to both residents and non-residents of Puerto Rico.
If you sell property or investments in Puerto Rico, you will not have to pay any capital gains taxes on the profits. Puerto Rico allows you to exclude up to $60,000 of pension or retirement income from your taxable income each year.
If you own a business in Puerto Rico that generates more than $400 in net profits, then you can deduct all of the taxes you paid on your net earnings from the previous tax year! This deduction is subject to certain limitations; please consult with a certified public accountant (CPA) before taking this deduction so that they can advise whether it will be beneficial for your situation or not.
There are no state taxes in Puerto Rico, which means that residents don’t have to about paying any state taxes on their income or property. There are also no municipal or local taxes in Puerto Rico, so residents don’t have to worry about paying any of those either!
You can deduct up to $15,000 per year for education expenses from your taxable income if you’re a resident of Puerto Rico and file jointly with your spouse or civil partner. This deduction is subject to certain limitations; please consult with a certified public accountant (CPA) before taking this deduction so that they can advise whether it will be beneficial for your situation or not.
If you own real estate in Puerto Rico, additional tax benefits are available through Act 20 and Act 22. These laws provide special tax breaks for investors who purchase residential properties within the territory’s boundaries. In a nutshell, take a quick look at the benefits:
01) Puerto Rican residents are exempt from US federal income taxes.
02) Residents are only taxed on income earned in Puerto Rico, not on income earned outside of the island.
03) There is no capital gains tax in Puerto Rico.
04) The dividend and interest income paid to resident taxpayers is also exempt from taxation.
05) The estate and gift tax exemption amount is $600,000 USD (compared to $11,180,000 USD for US citizens).
06) Residents are allowed a full deduction for all contributions to Puerto Rican retirement plans.
07) Businesses in Puerto Rico are taxed at a flat rate of just 27%. This is much lower than the corporate tax rates in the United States.
08) There is no sales tax in Puerto Rico.
09) The import duties on goods brought into Puerto Rico are also waived.
10) In addition, there are numerous other tax breaks and incentives available for businesses operating in Puerto Rico.