Puerto Rico Tax Residency (Act 60)

Key parameters
Threshold	183 days
Period / Window	Calendar year (1 Jan – 31 Dec)
Counting	Any part of a day
Alternative	549 days / 3 years
Additional requirements	Tax home, closer connection tests

You are a bona fide resident of Puerto Rico for a tax year only if you meet all 3 of these tests. Missing one disqualifies you, however comfortably you clear the other two:

• Presence test — the only one measured in days, satisfied through any one of five routes. See How to keep track below.
• Tax home test — your tax home must be in Puerto Rico, and not outside it at any point in the year. Your tax home is your main place of business or employment, or, if you have no fixed workplace, the place where you regularly live.
• Closer connection test — you must not have a closer connection to the United States, or to a foreign country, than you have to Puerto Rico. This is a weighing of facts rather than a threshold.

Bona fide residency is what lets you exclude Puerto Rico-source income from your US federal return. A US citizen or green card holder who qualifies still files federally, and is still taxed by the United States on income arising outside Puerto Rico.

An Act 60 decree is a separate application to Puerto Rico's economic development department. Becoming a bona fide resident doesn't grant one, and holding one doesn't prove you are one — but the decree only works if the residency underneath it does.

• What it means — the individual resident investor decree exempts qualifying Puerto Rico-source passive income from Puerto Rico income tax: interest, dividends, and long-term capital gains accruing after you become a resident. Stacked with the federal exclusion, that can mean no US federal income tax on the same income either. It does nothing for income arising outside Puerto Rico. A separate export services decree taxes qualifying business income from services supplied to clients elsewhere at a flat 4%.
• Who can apply — you must become and remain a bona fide resident, buy a home in Puerto Rico within two years of the decree, holding title personally rather than through a company, and make a set annual donation to listed local charities alongside annual reports. Applications from 1 January 2027 also need six years of non-residence immediately beforehand.
• What it gives — applications filed on or before 31 December 2026 carry a 0% rate, running to 31 December 2035. From 1 January 2027 that rate becomes 4%, with the programme extended to 31 December 2055 under Act 38-2026. Either way, gains built up before you moved are taxed at 5% if realised at least ten years after you become resident.

• Bona fide residency is retested every year. Clearing it once doesn't lock it in, and a year in which your tax home or your ties drift back to the mainland breaks the chain for that year.
• The closer connection test is where most challenges land. A retained mainland home, mainland voter registration, or family who stayed behind can outweigh a clean day count entirely.
• Capital gains are split by when they accrued. Appreciation built up before you moved is treated differently from appreciation that accrues afterwards, so the value of assets at the point of the move matters.
• The filing date fixes the rate, not the decree date. Whether the individual decree carries 0% or 4% turns on when the application was submitted, so a decree issued later can still sit on the earlier terms. Existing decree holders can elect to move onto the newer terms instead, trading the lower rate for a longer run.

If the Internal Revenue Service (IRS) decides you weren't a bona fide resident, the Puerto Rico income you excluded becomes federally taxable, with an accuracy-related penalty of 20% of the underpayment or 75% where civil fraud is established. The IRS has run a dedicated compliance campaign on Act 60 decree holders since 2021, matching Puerto Rico's decree lists against federal returns, and Puerto Rico can separately revoke a decree. Professional tax advice is strongly recommended in situations like this.

The whole life moves across

You relocate to San Juan in January, run your consulting business from an office there, and spend 300 days on the island. Your home, car and family move with you. Presence, tax home and closer connection all point to Puerto Rico, so you're a bona fide resident for the year.

Missing every presence route by a margin

You split the year between the island and the mainland, spending 170 days in Puerto Rico and 120 in the United States. That misses the 183-day route, your three-year total falls well short of 549, and you're over the 90-day US limit. Your US earned income is far above the $3,000 ceiling, and a retained mainland home rules out the last one.

Enough days, wrong tax home

You spend 190 days in Puerto Rico, but you work for a mainland employer from its mainland office on your trips back, and your spouse and children stay in the family home there. You clear the 183-day presence route, but your tax home and your closer connection are both still in the United States, so you don't qualify — and an Act 60 decree wouldn't change that.

• IRS — Publication 570, Tax Guide for Individuals With Income From U.S. Possessions
• IRS — Moving to or from a United States territory or possession
• Departamento de Desarrollo Económico y Comercio — Incentives and support programs