Yes, Puerto Rico does have a capital gains tax. Bona fide residents pay a flat 15% on long-term gains under Puerto Rico’s own tax code, short-term gains are taxed as ordinary income at rates that reach 33%, and holders of an Individual Investor decree under Act 60 can pay 0% on gains that accrue after they move to the island. Anyone who has not established bona fide residency in Puerto Rico owes the same federal capital gains rates they would pay on the mainland.
The Standard Puerto Rico Rates
Puerto Rico runs its own independent tax system under the Puerto Rico Internal Revenue Code. Bona fide residents without a special tax decree pay capital gains tax to Puerto Rico rather than to the federal government on their Puerto Rico-sourced income.
The structure will feel familiar. Short-term capital gains on assets held one year or less are taxed as ordinary income at Puerto Rico’s graduated rates, which top out at 33%. Long-term gains on assets held more than a year get a preferential flat rate of 15%.
That 15% rate covers the usual investment assets: stocks, bonds, mutual funds, and real estate other than a primary residence. Puerto Rico’s tax code does not carve out a higher rate for collectibles the way the federal code does, so art, coins, and similar assets fall under the same 15% long-term rate.
Selling Your Primary Home
Puerto Rico gives relief on profits from selling your main home. Under Law 180-2025, qualifying primary residence sales can be fully exempt from Puerto Rico capital gains tax, provided the property meets the statutory conditions. Before that change, such gains were generally taxed at 10%. On the federal side, IRC Section 121 separately excludes up to $250,000 of gain for single filers and $500,000 for married couples filing jointly when the home was owned and used as a primary residence for at least two of the five years before the sale.1Office of the Law Revision Counsel. 26 USC 121 – Exclusion of Gain From Sale of Principal Residence
Why Bona Fide Residency Controls Everything
Every Puerto Rico rate above assumes you actually qualify as a bona fide resident of Puerto Rico under federal law. Getting a driver’s license or renting an apartment on the island is not enough. The IRS defines bona fide residency under IRC Section 937, and it requires passing three tests for the entire tax year.
The first is physical presence: at least 183 days on the island during the tax year. An alternative path allows you to qualify by being present at least 549 days over a three-year period, provided you spend at least 60 days in Puerto Rico each year of that window.2Office of the Law Revision Counsel. 26 USC 937 – Residence and Source Rules Involving Possessions
The second test requires that your tax home stays in Puerto Rico all year, meaning your principal place of business or employment sits on the island. Keeping a business office in New York and flying to San Juan on weekends fails this test. The third test looks at whether you have a closer connection to the mainland or a foreign country than to Puerto Rico. The IRS weighs factors like where you vote, where your family lives, where your bank accounts are, and where your driver’s license is issued.2Office of the Law Revision Counsel. 26 USC 937 – Residence and Source Rules Involving Possessions
Failing any one of these tests means you are treated as a regular US taxpayer for federal purposes. Your worldwide income gets taxed at standard federal rates, and Puerto Rico’s local rates and incentives become irrelevant. The IRS has been scrutinizing Act 60 beneficiaries more aggressively in recent years, and paper-thin residency claims that don’t hold up under audit can be expensive.
The Act 60 Zero Percent Rate
The reason Puerto Rico’s capital gains rules attract so much attention is the Individual Investor Tax Exemption Decree under Chapter 2 of Act 60, the Incentives Code. This decree eliminates Puerto Rico income tax on capital gains, dividends, and interest for qualifying individuals. The exemption reaches both short-term and long-term gains, and when combined with the federal exclusion under Section 933, the effective total tax rate on post-move appreciation can hit zero.3Government of Puerto Rico. Puerto Rico’s Incentives Code – Brochure Act No. 60-2019
To qualify, you must establish bona fide residency under the tests above. Act 60 also imposes a lookback rule: you cannot have been a resident of Puerto Rico at any time during the ten taxable years before you establish residency. The program was originally set to expire on December 31, 2035; Puerto Rico has since extended the benefits through 2055.3Government of Puerto Rico. Puerto Rico’s Incentives Code – Brochure Act No. 60-2019
Holding the decree is not passive. Recipients must contribute at least $10,000 annually to qualified Puerto Rico nonprofits starting in the second year, buy real property in Puerto Rico for use as a principal residence within two years of receiving the decree, and file an annual report with Puerto Rico’s Department of Economic Development and Commerce that carries a $5,000 filing fee. Losing the decree means retroactive application of standard rates.
What Act 60 Does Not Cover
The 0% rate applies only to appreciation that accrues after you become a bona fide resident. When you achieve residency, you establish a new cost basis on all your existing assets as of that date, and only gains above that new basis qualify for the exemption. This is where prospective movers most often miscalculate the benefit.
Pre-move appreciation gets its own treatment. If you sell an asset within the first ten years of residency, the portion of gain attributable to pre-move appreciation is taxed at Puerto Rico’s standard 15% long-term rate. Hold the asset more than ten years after establishing residency and the pre-move portion drops to 5%. The federal government also treats pre-move gain as US-source income, so it does not qualify for the Section 933 exclusion and can be taxed federally even years after the move.4Office of the Law Revision Counsel. 26 USC 933 – Income From Sources Within Puerto Rico
Sourcing controls the rest. Real estate gains are sourced where the property sits. Sell a condo in San Juan and the gain is Puerto Rico-sourced, eligible for the Section 933 exclusion. Sell a rental in Florida and the gain is US-sourced and fully subject to federal capital gains rates regardless of your Puerto Rico residency.5Internal Revenue Service. FTC Sourcing of Income
For stocks, bonds, and other personal property, the general rule under IRC Section 865 sources the gain to the seller’s tax residence, so a bona fide Puerto Rico resident’s securities gains are generally Puerto Rico-sourced. Section 865 also contains a provision that can re-source personal property gains back to the United States for US citizens unless at least 10% tax was actually paid to a foreign jurisdiction. A separate carve-out exempts Puerto Rico bona fide residents who sell stock in corporations actively doing business in Puerto Rico with more than half their gross income derived from Puerto Rico operations over the prior three years.6Office of the Law Revision Counsel. 26 USC 865 – Source Rules for Personal Property Sales For decree holders paying 0% on broad US stock portfolios, this 10% rule has become an audit focus.
Cryptocurrency and other digital assets follow the personal property rule: gains are sourced to the seller’s tax residence, so crypto gains realized after the move are generally Puerto Rico-sourced. The same pre-move basis rules apply.7Internal Revenue Service. Income From Sources Within Puerto Rico
Federal Filing Doesn’t Go Away
Moving to Puerto Rico doesn’t end your federal filing obligation. US citizens remain subject to federal income tax on worldwide income; what changes is the scope of what counts as taxable income. IRC Section 933 lets a bona fide Puerto Rico resident exclude Puerto Rico-sourced income from US gross income, which is the mechanism that makes Act 60 work at the federal level.4Office of the Law Revision Counsel. 26 USC 933 – Income From Sources Within Puerto Rico
The exclusion is not a blanket pass. Capital gains sourced outside Puerto Rico stay fully subject to federal taxation. A bona fide resident who sells US real estate or earns income from a US-based business pays federal capital gains tax at the standard rates of 0%, 15%, or 20%, plus the 3.8% Net Investment Income Tax when modified adjusted gross income exceeds the statutory thresholds.8Internal Revenue Service. Questions and Answers on the Net Investment Income Tax
Establishing or ending bona fide residency also triggers a disclosure. If your worldwide gross income exceeds $75,000 in the year you claim bona fide resident status, you must file IRS Form 8898. Skipping it carries a $1,000 penalty on top of any other consequences.9Internal Revenue Service. Instructions for Form 8898 Bona fide residents still file a federal Form 1040 reporting worldwide income and claiming the Section 933 exclusion, and they also file a Puerto Rico income tax return. Decree holders add the annual report to the Department of Economic Development and Commerce. Missing any of these filings can put both the Section 933 exclusion and the Act 60 decree at risk.
One boundary worth flagging: moving to Puerto Rico does not shield you from federal estate or gift tax. US citizens owe federal estate tax on worldwide assets regardless of where they live, including assets outside the fifty states.10Internal Revenue Service. Some Nonresidents With US Assets Must File Estate Tax Returns The Puerto Rico benefits are on the income tax side, not the transfer tax side.