ELECTING TO TREAT RENTAL INCOME AS INCOME EFFECTIVELY CONNECTED WITH BUSINESS
Non-resident couple's joint monthly rental income1		US$1,500	US$6,000	US$12,000
Annual Rental Income		18,000	72,000	144,000
Less Costs2		(900)	(3,600)	(7,200)
Less Depreciation3		(9,000)	(30,286)	(88,571)
= Taxable Income		8,100	38,114	48,229
Income Tax Rates4
Up to US$17,000	7%	567	1,190	1,190
US$17,000 – US$30,000	14%	-	1,820	1,820
US$30,000 – US$50,000	25%	-	2,029	4,557
Over US$50,000	33%	-	-	3,706
Annual Income Tax Due		US$567	US$6,039	US$7,567
Tax Due as % of Gross Income		3.15%	7.00%	5.25%
Thanks to:

DISCLAIMER:The information contained above is marketing material only and is not written tax advice directed at the particular facts and circumstances of any person and should not be relied upon. We encourage you to discuss your particular situation with us or an independent tax advisor. This information was last updated on March 14, 2007.

Notes

Kevane Grant Thornton LLP is a member firm of Grant Thornton International. Grant Thornton International is not a worldwide partnership. Member firms of the international organization are independently owned and operated.

¹ The property is jointly owned by husband and wife, but then taxed separately (50% upon each partner). Generally, non-resident foreign individuals are subject to a flat rate of 29% and the tax is imposed on the gross income (no deductions allowed). However, an election can be made to treat the income from real property as income effectively connected with business in Puerto Rico and the election allows the non-resident foreign individual to be taxed on his net income at progressive income tax rates.

² Estimated values. Income-generating expenses such as maintenance fees, repairs, and property taxes are deductible. Only actually incurred expenses are allowed to be deducted from the gross income.

³ Estimated values.

⁴ The income tax rates in the table are for married couples filing jointly. The following income tax table applies for married couples filing separately:

NOT ELECTING TO TREAT RENTAL INCOME AS INCOME EFFECTIVELY CONNECTED WITH BUSINESS
Non-resident couple's joint monthly rental income1		US$1,500	US$6,000	US$12,000
Annual Rental Income		18,000	72,000	144,000
= Taxable Income		18,000	72,000	144,000
Income Tax Rates2
Flat Rate	29%	5,220	20,880	41,760
Annual Income Tax Due		US$5,220	US$20,880	US$41,760
Tax Due as % of Gross Income		29%	29%	29%
Thanks to:

DISCLAIMER:The information contained above is marketing material only and is not written tax advice directed at the particular facts and circumstances of any person and should not be relied upon. We encourage you to discuss your particular situation with us or an independent tax advisor. This information was last updated on March 14, 2007.

Notes

Kevane Grant Thornton LLP is a member firm of Grant Thornton International. Grant Thornton International is not a worldwide partnership. Member firms of the international organization are independently owned and operated.

¹ The property is jointly owned by husband and wife, but then taxed separately (50% upon each partner). Generally, non-resident foreign individuals are subject to a flat rate of 29% and the tax is imposed on the gross income (no deductions allowed).

² Non-resident foreigners not electing to treat their rental income as income effectively connected with business are taxed at the standard 29% rate which is levied on the gross income.