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Q: Puerto Rican Taxes ( Answered 5 out of 5 stars,   0 Comments )
Question  
Subject: Puerto Rican Taxes
Category: Miscellaneous
Asked by: regino-ga
List Price: $20.00
Posted: 30 Oct 2006 19:27 PST
Expires: 29 Nov 2006 19:27 PST
Question ID: 778647
Hello  -  $20.
I would like to know the following; if a U S Citizen becomes a Puerto
Rican citizen and establishes a permanent residence there, who would
he pay income tax to and what are the rates (especially the Estate Tax
rates).
Answer  
Subject: Re: Puerto Rican Taxes
Answered By: hummer-ga on 31 Oct 2006 14:04 PST
Rated:5 out of 5 stars
 
Hi regino-ga,

Puerto Ricans are already U.S. citizens!

Puerto Rico
(territory of the US with commonwealth status)
Puerto Ricans were granted US citizenship in 1917.
https://cia.gov/cia/publications/factbook/geos/rq.html

Residents of Puerto Rico
"Income you receive from Puerto Rican sources during your residence in
Puerto Rico is exempt from U.S. tax. This includes income for the
period of Puerto Rican residence in the year you change your residence
from Puerto Rico if you resided there at least 2 years before the
change. However, income you receive for services performed in Puerto
Rico as an employee of the United States is not exempt from U.S.
income tax."
http://www.irs.gov/businesses/small/international/article/0,,id=97184,00.html

Puerto Rico Estate Taxes
Puerto Rico's estate tax system exempts $400,000 from the net taxable
estate of a resident decedent. The remaining amount in the estate is
taxed at the following rates: [see table]
http://www.finance.cch.com/pops/c50s15d170_PR.asp

Puerto Rico
Tax Forms & Info
http://www.sisterstates.com/statetaxforms.php?id=43

"While residents of the island do not pay federal income tax, Puerto
Ricans do pay U.S. federal payroll taxes (Social Security and
Medicare). Puerto Rico residents are eligible for Social Security
benefits upon retirement. Puerto Rico is excluded from Supplemental
Security Income (SSI). Because Puerto Ricans do not pay federal income
tax, Puerto Rico receives less than 15% of the Medicaid funding it
would be alloted as a state. For Medicare, Puerto Rico pays fully but
only receives partial benefits."
http://en.wikipedia.org/wiki/Puerto_Rico

Who Must File
Use the following worksheet to determine if you have to file a U.S.
income tax return:
Who Must File Worksheet for Bona Fide Residents of P.R. with exempt
income (under Section 933)
"The regulations provide that a gain from a disposition of certain
property by a U.S. citizen or resident who becomes a bona fide
resident of a possession and owned the property on the date they
became a bona fide resident may NOT be treated as from sources within
a possession. This special gain rule (SGR) applies to disposition of
certain personal property like stocks, bonds, debt instruments, and
other investment property like diamonds or gold, which is held for
investment, and that is sold within 10 years of the date that the
individual became a bona fide resident of the possession. Because
these gains are treated for U.S. income tax purposes as from sources
not within Puerto Rico, this income may not be excluded under IRC
933. However, individuals generally may claim a foreign tax credit
for income tax paid to Puerto Rico on such gain.
http://www.irs.gov/pub/irs-pdf/p1321.pdf

Departamento de Hacienda
http://www.hacienda.gobierno.pr/

I was glad to work on this for you. If you have any questions, please
post a clarification request and wait for me to respond before
closing/rating my answer.

Thank you,
hummer

Google Search Terms Used: puerto rico estate tax income resident citizenship
regino-ga rated this answer:5 out of 5 stars
Excellent work.  Thank you very much.

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