Puerto Rico: Act 60 (0% on Capital Gains for New Residents)

Concept

Puerto Rico is an unincorporated U.S. territory with special tax status. For U.S. citizens and residents, it represents a rare legal opportunity to reduce federal tax: a bona fide resident of Puerto Rico is exempt from U.S. federal tax on income sourced in Puerto Rico (IRC Section 933), and Act 60 makes Puerto Rican passive income 0%.

This is a tool specifically for US persons (citizens and green card holders). For non-Americans, it is usually irrelevant: they have no U.S. federal tax liability, and territorial or non-dom jurisdictions make more sense.

🍓 Status as of June 1, 2026. Act 38-2026 (signed March 10, 2026) extended the program until 2055 but changed the rate: for applications filed from January 1, 2027, the tax on capital gains, dividends, and interest will increase from 0% to 4%. Current benefits for individual investors (Chapter 2) expire December 31, 2035. The 0% window is closing: filing before the end of 2026 locks in 0%.

What Act 60 Provides (Individual Resident Investor, Chapter 2)

0% Puerto Rican tax on passive income sourced in Puerto Rico (capital gains, dividends, interest) earned AFTER becoming a resident;
from January 1, 2027, for new applications — 4% instead of 0%;
annual: $10,000 charitable contribution to Puerto Rican nonprofits plus $5,000 filing fee;
obligation to purchase real estate in Puerto Rico within 2 years (primary residence).

Who Qualifies as a Bona Fide Resident

Three tests: presence (at least 183 days in Puerto Rico per year), tax home (no tax home outside Puerto Rico), and closer connection (to Puerto Rico rather than the U.S. or another country).

Main Trap: Pre-Move Appreciation and IRS Scrutiny

appreciation accumulated BEFORE the move remains taxable in the U.S. (built-in gains rules; gains realized within 10 years after the move may be taxed under U.S. sourcing rules);
the IRS has intensified scrutiny of Act 60 (income sourcing, crypto) — a genuine change of residency and careful income sourcing analysis are required;
the "Puerto Rican source vs. U.S. source" distinction is the key dividing line; incorrect classification = federal tax.

Who Is It For

U.S. citizens/green card holders with substantial capital gains or portfolios, willing to genuinely relocate to Puerto Rico;
crypto investors (with caveats regarding pre-move appreciation and IRS scrutiny);
NOT for non-Americans: they have no U.S. federal tax liability, and Act 60 provides no benefit — territorial/non-dom regimes are better.

Risks

this is a U.S. tax planning tool; errors in bona fide status or income sourcing = federal tax plus penalties;
pre-move appreciation and the 10-year rule;
rate increases to 4% from 2027;
actual residence in Puerto Rico is mandatory.

Frequently Asked Questions

Is Act 60 suitable for non-Americans?

Usually not. Without U.S. tax liability, there is no benefit; territorial or non-dom jurisdictions (Georgia, Cyprus, Turkey) make more sense.

What does it cost per year?

$10,000 charitable contribution + $5,000 filing fee, plus mandatory home purchase within 2 years.

Is pre-move appreciation exempt?

No. Appreciation accumulated before becoming a Puerto Rico resident remains subject to U.S. tax; built-in gains rules and the 10-year window are important.

What changes from 2027?

For applications from January 1, 2027, the rate on capital gains/dividends/interest will increase from 0% to 4% (Act 38-2026). Filing before the end of 2026 locks in 0%.

FAQ