Puerto Rico Crypto Tax: Investor’s Guide 2024

Wondering how cryptocurrency is taxed in Puerto Rico? In this guide, we’ll break down the tax benefits available to Puerto Rican residents — and discuss how interested investors can relocate! 

How is crypto taxed in Puerto Rico? 

Puerto Rican residents are subject to a 0% tax on cryptocurrency. This includes profits from cryptocurrency disposals as well as income from staking and mining for individuals. 

ACT 60, originally known as ACT 22, offers these tax benefits to Puerto Rican residents who meet specified criteria. Simply being present in Puerto Rico is not enough to qualify for tax benefits (more on this later).

Corporations based in Puerto Rico pay 4% tax on their income. 

What is the advantage of moving to Puerto Rico? 

While there are some countries where cryptocurrency is tax-free, it’s important to remember that American citizens are taxed on their worldwide income. Even if you live in a country where capital gains and income are not taxed, you will be required to pay American taxes unless you choose to renounce your citizenship. 

However, Puerto Rico offers unique tax benefits. Puerto Rican residents are not subject to US taxes for income and capital gains sourced in Puerto Rico — allowing American investors to pay low taxes without renouncing their citizenships! 

However, Puerto Rican residents are required to pay US taxes for income sourced outside of Puerto Rico. 

Why are Puerto Rico crypto taxes different from United States taxes? 

Puerto Rico is a territory of the United States. Because Puerto Rico is not a state and not represented in Congress, it is free to make its own tax laws. 

How do I become a resident of Puerto Rico? 

To qualify for the 0% tax on cryptocurrency capital gains, you will need to be a bona fide resident of Puerto Rico. This means that you should meet the following requirements. 

Presence 

To be considered a resident, you will need to satisfy one of the five following conditions related to ‘presence’ in Puerto Rico:

• Residing in Puerto Rico for a minimum of 183 days during the tax year.
• Staying in Puerto Rico for a combined total of 549 days over the current and past two tax years, with a minimum of 60 days each year.
• Staying in the US for no more than 90 days during the tax year 
• Earning no more than $3,000 in the US and spending more days in Puerto Rico than in the US throughout the tax year
• Having no significant connections to the US throughout the tax year

Tax home 

To be considered a resident, you should not have a ‘tax home’ outside of Puerto Rico. This means that your primary place of employment should be located in Puerto Rico. If you do not have a primary place of employment, your primary residence will be considered your tax home. 

Connections 

You should not have ‘significant connections’ to the United States or any foreign nation to be considered a resident of Puerto Rico.

Many factors may be used to determine your ‘connections’, including the following: 

• Where is your permanent home located?
• Where does your spouse and children live?
• Where do you conduct business? 
• Where is your driver’s license registered?
• Where are you registered to vote?
• Where are the organizations you are affiliated with — whether social, cultural, religious, or political — located?

In addition, you must make an annual donation of at least $10,000 to nonprofits based in Puerto Rico. At least 50% of the donation must go to nonprofits combating child poverty.

If you are planning to relocate, you should take steps to create closer ‘connections’ to Puerto Rico to be eligible for tax benefits. 

What is Puerto Rico ‘sourced’ income? 

It’s important to remember that tax benefits are only available for income ‘sourced’ in Puerto Rico. If you bought your cryptocurrency in the United States and disposed of it in Puerto Rico, it will not be considered Puerto Rico-sourced income. 

For this reason, some investors choose to sell their cryptocurrency, then re-buy it once they’ve relocated to Puerto Rico. 

How is mining and staking taxed in Puerto Rico? 

In Puerto Rico, income from mining and staking for corporations is subject to a 4% tax. It’s likely that income from mining and staking is tax-free for individuals. 

How are crypto losses taxed in Puerto Rico? 

Because cryptocurrency gains are not taxed for Puerto Rican residents, cryptocurrency losses do not carry tax benefits. If you’re thinking about relocating to Puerto Rico, you may want to consider claiming your capital losses and offsetting your capital gains before moving. 

How do I file my taxes in Puerto Rico? 

You may be required to file the following tax returns as a bona fide Puerto Rican resident. 

• A Puerto Rico tax return (Form 482) to report worldwide income. 
• A US return (Form 1040) to report income worldwide, excluding your Puerto Rico income.

If you are Puerto Rico resident during the year and all of your income is sourced from Puerto Rico, you will not be required to file a US return. 

Are there other ways to avoid crypto taxes? 

If relocating to Puerto Rico isn’t a viable option for you, there are other strategies you can use to reduce your crypto tax bill. For example, tax-loss harvesting can help you offset an unlimited amount of capital gains and up to $3,000 of income every year. 

For more ways to legally reduce your crypto taxes, check out our guide to avoiding crypto taxes.