36.10 Earnings in Puerto Rico

If you are a U.S. citizen who is also a resident of Puerto Rico for the entire year, you generally report all of your income on your Puerto Rico tax return. Where you report income from U.S. sources on the Puerto Rico tax return, a credit against the Puerto Rico tax may be claimed for income taxes paid to the United States.

If you are not a resident of Puerto Rico, you report on a Puerto Rico return only income from Puerto Rican sources. Wages earned for services performed in Puerto Rico for the U.S. government or for private employers are treated as income from Puerto Rican sources.

U.S. tax returns.

As a U.S. citizen, you must file a U.S. tax return reporting income from all sources. But if you are a bona fide resident of Puerto Rico for an entire tax year, you do not report on a U.S. tax return any income earned in Puerto Rico during your residence there, except amounts received for services performed in Puerto Rico as an employee of the U.S. government. Similar rules apply if you have been a bona fide resident of Puerto Rico for at least two years before changing your residence from Puerto Rico. On a U.S. tax return, you may not deduct expenses or claim tax credits allocable to the excludable income. Personal exemptions are fully deductible.

Planning Reminder

Information for Puerto Rico Filing

Information on Puerto Rico tax returns may be obtained at www.hacienda.gobierno.pr. The phone number is 787-722-0216, option #8. Written requests may be sent to the Departamento de Hacienda, Negociado de Asistencia Contributiva, P.O. Box 9024140, San Juan, Puerto Rico, 00902-4140.

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If you are not a bona fide resident of Puerto Rico for the entire tax year, or were not a bona fide resident for two years prior to the tax year, you report on your U.S. tax return all income you earned in Puerto Rico, as well as all income from other sources. If you are required to report income earned in Puerto Rico on your U.S. tax return, you may claim a credit for income tax paid to Puerto Rico. You figure the credit on Form 1116.

See IRS Publication 570, Tax Guide for Individuals With Income from U.S. Possessions, for further information on filing U.S. and Puerto Rican tax returns.