Earning income in Puerto Rico is subject to the tax laws of both Puerto Rico and the United States. Although a part of the U.S., Puerto Rico has an independent tax system similar to the one in the U.S. As a result, you may have to file two separate annual tax returns to comply with Puerto Rican and U.S. tax laws. In addition, your residency status in Puerto Rico partly affects your tax liability in a given year.
Determine your residency status. According to IRS rules, you are a bona fide resident of Puerto Rico if you meet at least one of five presence tests. For example, IRS rules stipulate that you must be present in Puerto Rico for a minimum of 183 days during the year. Another test indicates that you must have been present in Puerto Rico for a minimum of 549 days during the current tax year and the previous 2 tax years. You are also considered a bona fide resident of Puerto Rico if were present in the United States for less than 90 days during the year, had no connection to the U.S., or if your earned U.S. income is under $3000 and you were present more days in Puerto Rico than you were in the U.S.
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Determine how your income will be taxed. If you are a bona fide resident of Puerto Rico, you may have to file two tax returns: one for Puerto Rico and a second for the United States. Your Puerto Rican tax return includes all income from all sources. Any income earned in the U.S. may be claimed as a credit against your Puerto Rican tax liability. This credit is determined by the income taxes you pay to the United States. However, if all your income is earned in Puerto Rico, you will not have to file a U.S. tax return.
Fill out the appropriate tax forms to avoid late filing or refund delays. U.S. tax returns must be submitted on the corresponding 1040 forms. Puerto Rico tax returns are filed with either a short or long form. The short form is used by individuals earning less than $75,000 who can claim standard deductions and whose income is exclusively from Puerto Rican sources. Everyone else must use the long form.
Send your forms to the appropriate tax authority. If you are claiming a refund from your Puerto Rican tax return, mail your return to the following address:
Departamento de Hacienda P.O. Box 50072 San Juan, P.R. 00902-6272
If you are sending payment along with your Puerto Rican income tax filings, send your packet to the following address:
Departamento de Hacienda P.O. Box 9022501 San Juan, P.R. 00902-2501