Austin to Puerto Rico: Check Your Act 60 Tax Savings

Leaving Austin for Puerto Rico means shifting your focus from state to federal taxes. In Texas, you pay no state income tax, but you still owe the IRS. In Puerto Rico, under Act 60, you can potentially pay 0% in federal income tax on income you earn on the island. This is the main attraction of the move. To get this benefit, you have to be a 'bona fide resident' of Puerto Rico and your income must be from a Puerto Rican source. It sounds simple, but the rules can be tricky. Our check is designed to quickly run through the basic requirements and flag areas you need to pay closer attention to. It's a fast first step to understanding if this move makes sense for you financially.

To get Act 60 benefits, you have to prove to the IRS that you are a bona fide resident of Puerto Rico. This means more than just being there for 183 days a year. You also need to have your main workplace and your closest personal and financial ties in Puerto Rico. Think of it as a three-part test: the presence test (183+ days), the tax home test (your work is in PR), and the closer connection test (your life is in PR). Our tool helps you do a quick self-assessment against these tests. It’s a simple way to see if you’re on the right track to establishing bona fide residency and securing your tax benefits.

This is a big one. Only income from a Puerto Rico source gets the 0% tax rate. If you work remotely for a U.S. company while living in Puerto Rico, you need to be careful. The IRS will look at where your work is actually being done and who it benefits. Just because you are on the island doesn't automatically make your salary PR-sourced income. It’s important to understand this distinction to avoid any surprises from the IRS. Our check can help you think through how your income might be classified and what you need to do to make sure it qualifies for Act 60.