Puerto Rico: Living There - Tax Issues
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Living There
INDIVIDUAL TAXATION
Under Puerto Rican tax law, individuals are presumed to be resident if they are domiciled in Puerto Rico for a period of 183 or more days in a calendar year.
Residents are taxed on their worldwide income. Married couples may be taxed jointly or separately.
INCOME TAX
Income is taxed at progressive rates. A resident taxpayer can qualify for personal deductions and additional deductions (itemized or standard).
INCOME TAX FOR SINGLE INDIVIDUALS AND |
|
| TAXABLE INCOME, US$ | TAX RATE |
| Up to US$1,000 | 7% |
| US$1,000 – US$8,500 | 10% on band over US$1,000 |
| US$8,500 – US$15,000 | 15% on band over US$8,500 |
| US$15,000 – US$25,000 | 28% on band over US$15,000 |
| Over US$25,000 | 33% on all income over US$25,000 |
| Source: Global Property Guide | |
INCOME TAX FOR MARRIED COUPLES FILING JOINTLY |
|
| TAXABLE INCOME US$ | TAX RATE |
| Up to US$2,000 | 7% |
| US$2,000 – US$17,000 | 10% on band over US$2,000 |
| US$17,000 – US$30,000 | 15% on band over US$17,000 |
| US$30,000 – US$50,000 | 28% on band over US$30,000 |
| Over US$50,000 | 33% on all income over US$50,000 |
| Source: Global Property Guide | |
Each taxpayer is entitled to the following deductions (called personal exemptions):
- US$1,300 for a single taxpayer or a married person not living with their spouse
- US$3,000 for a married couple
There are other deductions a resident taxpayer can avail of and these deductions can be deducted into two ways. The taxpayer can opt for the standard deductions or the itemized deductions.
Standard deductions may be claimed instead of itemized deductions. The standard deductions are:
- US$3,000 for a married couple filing jointly, or
- US$1,500 for couples living together and filing separately, or
- US$2,000 for a single taxpayer (or a married person not living with their spouse)
In lieu of standard deductions, a taxpayer can opt for itemized deductions such as:
- Child’s care expenses: up to US$600 for one child and US$1,200 for two or more children
- Medical expenses (medical and dental expenses, including insurance premiums over 3% the adjusted gross income)
- Taxes on the taxpayer’s principal residence and license fees on the taxpayer’s automobile
- Interest expense on personal indebtedness
- Rent: 10% of the annual rent on the taxpayer’s principal residence with a maximum of US$500
- Charitable contributions: up to 15% to 30% of the adjusted gross income
CAPITAL GAINS
Capital gains earned by resident individuals are taxed as ordinary income. Long-term capital gains are gains earned from an asset which is held for more than 6 months. The taxable gain is computed by deducting the acquisition costs from the gross selling price.
However, individuals can opt for their net long-term (held for more than 6 months) capital gains to be taxed at a flat rate of 20%.
PROPERTY TAX
Property Tax
Real property is subject on an annual real property tax levied on the property’s market value. The Commonwealth imposes a flat rate of 1.03% with an additional 1% for personal property (effective rate of 2.03% for personal property) and 3% for real property or land (effective rate of 4.03% for real property or land).
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