More and more Americans, near and not so near retirement, are taking notice of Puerto Rico’s potential to become the “new” Florida. Florida has the golf courses and resorts that make many people choose for their retirement lifestyle. It is warm and beautiful, and just provides a great quality of life. However, did you know that moving to Puerto Rico has those same “perks?”
If you spend the time researching a move to Puerto Rico, you will find it is easy travel, especially on a flight, with at least 50 flights leaving several East Coast airports about 50 times daily. If golf is your game, you will find several golf courses or country clubs, where the rum is freely poured at the 19th hole. Yes, you will find plenty of warm, beautiful weather living in Puerto Rico too.
While the warmer, beautiful weather and numerous golf courses and country clubs may just be enough to have you considering moving to Puerto Rico, what if you found out there are certain tax advantages to living in Puerto Rico? Would that help sway your decision?
Tax advantages can add up for entrepreneurs in the United States, if they can creditably relocate themselves and most of their business to Puerto Rico. Moving to Puerto Rico before they retire and cash out of their company would allow them to significantly slash their income, capital gains, and dividend taxes. This works especially well with service-based companies with markets outside of the United States, especially companies that deal with finance and technology.
One huge tax advantage to living in Puerto Rico is the income tax is only four percent, compared to the combined federal and state income tax that could reach 50 to 60 percent in New York State and California, for most successful business owners and entrepreneurs.
Living in Puerto Rico, dividend income is not taxable at all, compared to the 15 or 20 percent on dividends, depending on your tax bracket on the mainland. However, people in the lowest two tax brackets on the mainland do not pay any taxes on dividends.
This tax advantage could be huge, if you are receiving distributions from your company’s profits or have substantial investments from which you receive dividends, or if you are planning on using such income as part of your retirement nest egg.
Another huge tax advantage to living in Puerto Rico is that you do not have to pay any taxes on capital gains. If you remain living in the United States, you would have to pay 20 percent on capital gains.
If you do decide to move to Puerto Rico, make note of the value of shares you own. When you sell, you do not owe taxes on the gain in between.
If a person chooses to move to Puerto Rico for the many tax advantages, they must be a Puerto Rico resident for at least 183 days, must not have a home outside Puerto Rico, or any connection to the United States or other foreign country for business purposes before they can take advantage of these benefits.
You must have a home in Puerto Rico, and you have to eliminate any business connections and home ownership you may have in the United States. If it can be proven you still have residential and business ties to the United States, you will be held responsible for back taxes, penalties and interests.
Tax laws in the U.S. and abroad change regularly. Consult your tax professional for advice before making a decision to move to Puerto Rico. This blog is not intended to replace expert tax advice.
Like moving anywhere, heading to Puerto Rico requires some planning. Our experts can answer your questions about moving to and living in Puerto Rico. Rely on our years of moving families like yours. Ask us for advice, tips and information. From planning your move to adjusting to life in or outside of the islands, we’re always here to listen and help so when the big day comes, your move will go smoothly and you’ll feel right at home. Call our experts today at 866.305.5442 or email us webquote@compass.com.
