Quick Puerto Rico Tax Stats
| Tax Type | Rate / Info |
|---|---|
| Income Tax (Residents) | Up to 33% standard PR rates, but qualifying Act 60 residents can receive 0% on certain income |
| Capital Gains (Act 60) | 0% on Puerto Rico-sourced capital gains (if residency requirements met) |
| Sales Tax (IVU) | 10.5% total (state + municipal) |
| Jock Tax | U.S. states still tax income earned within their borders |
| Cost of Living (Range) | $70,000 – $180,000+ depending on lifestyle (San Juan metro) |
| Average Home Price | ~$400,000+ in San Juan metro; luxury coastal properties significantly higher |
Income Tax in Puerto Rico
Puerto Rico is a U.S. territory with its own tax system.
It is not a U.S. state, and its tax treatment differs significantly from the mainland. For qualifying residents under Act 60 (formerly Act 20/22):
- 0% tax on Puerto Rico-sourced capital gains
- Potential 0% on certain dividend income
- Significant reductions for export service businesses
- Federal income tax generally does not apply to Puerto Rico-sourced income (with important exceptions)
This is why many high-net-worth individuals, investors, and entrepreneurs have relocated down to the tropical island.
Why It’s Legal & Not Tax Evasion
Relocating to Puerto Rico and claiming tax benefits is legal if:
- You become a bona fide resident. (Purchase Primary Residence)
- You spend at least 183 days per year in Puerto Rico. (Typical in most U.S.)
- You establish a “tax home” and obtain residency there.
- You sever closer connections to a U.S. state.
This is tax planning, not tax evasion, when done correctly. The IRS explicitly recognizes Puerto Rico residency rules under federal law.
However, compliance is strict. Failure to meet residency standards can trigger audits and retroactive federal/state taxation.
How This Applies to Athletes
Puerto Rico can be powerful
- Retired athletes with significant investment portfolios.
- Athletes with large capital gains events (business, crypto, stock liquidity).
- Entrepreneurs exporting services through Puerto Rico entities.
- U.S. federal tax still applies to U.S.-sourced salary income.
- Jock tax still applies in states where games are played.
- Gross income earned while playing for mainland teams are U.S.-sourced.
Example
A retired NBA player who moves to Puerto Rico and sells $50 million in appreciated stock after establishing residency may qualify for 0% Puerto Rico capital gains tax on future gains.
But, an active NFL player earning $25 million from a mainland team will still owe U.S. federal tax and jock tax to states where games are played.
Puerto Rico does not eliminate those obligations.
Sales Tax (IVU)
Puerto Rico’s sales tax (IVU) totals 10.5%, higher than most U.S. states.
- 10% state
- 0.5% municipal
Luxury consumption is taxed accordingly.
Example
A $150,000 vehicle purchase in San Juan would incur ~$15,750 in sales tax, significantly higher than many mainland states.
So while income and capital gains treatment can be attractive, consumption tax is relatively high.
This is also the difference in depreciation rate when dealing with assets vs. liabilities, as sales tax starts the consumer further in the hole than in states that do not levy a sales tax.
Jock Tax
Puerto Rico does not shield athletes from mainland jock taxes.
- Income earned in California, Illinois, Massachusetts, etc., remains taxable there.
- Puerto Rico residency does not override U.S. state sourcing rules.
- Athletes playing for mainland teams still owe federal income tax.
This is one of the biggest misconceptions: moving to Puerto Rico does not eliminate all U.S. taxes, it mainly benefits Puerto Rico-sourced income and capital gains under Act 60.
Cost of Living and Housing
Cost of living varies significantly:
- San Juan / Dorado / Condado: Higher-end coastal living can exceed $150k–$250k+ annually depending on property and lifestyle.
- Utilities and imported goods can be expensive.
- Infrastructure reliability (power grid) has historically been a concern.
Housing
- Average homes in metro San Juan: $400,000+
- Luxury gated coastal communities (Dorado Beach, Condado beachfront): multi-million-dollar properties.
Athletes relocating should consider:
- Hurricane risk
- Insurance costs
- Infrastructure variability
- Property liquidity in niche luxury market
Residency Rules
To qualify for Puerto Rico tax incentives:
- 183+ days physically present per year
- Primary tax home in Puerto Rico
- Closer connection test passed (driver’s license, voter registration, property, social ties)
- Apply and be accepted under Act 60
Failure to meet these requirements can result in:
- IRS audit
- Retroactive tax liability
- Penalties and interest
- State tax claims from prior domicile
Residency must be genuine and defensible.
Risks & Considerations
While attractive, Puerto Rico relocation carries real risks:
- IRS scrutiny of high-income relocations
- Changing legislation (tax incentives are political)
- Natural disaster risk (hurricanes)
- Liquidity concerns in property markets
- Federal sourcing rules still apply
- Public perception / media narrative risks
Athletes must balance tax efficiency with long-term stability, career location, and compliance discipline.
Why Puerto Rico Is Unique for Athletes
- Potential 0% capital gains tax for qualifying residents
- Favorable treatment for certain export service businesses
- Not tax evasion, if bona fide residency requirements are met
- Does NOT eliminate federal tax or jock tax on mainland income
- Requires strict compliance and real relocation
Puerto Rico is most powerful for:
- Retired athletes
- Entrepreneurs
- Investors
- Athletes anticipating major liquidity event
It is less impactful for active players earning W-2 salary from mainland franchises.
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Next Athlete State Tax Reads
- California State Athlete Taxes
- New York State Athlete Taxes
- Florida State Athlete Taxes
- Texas State Athlete Taxes
- Washington State Athlete Taxes
Next Reads
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Credits
Sources: Puerto Rico Department of Treasury (Hacienda), IRS Publication 570 (Tax Guide for Individuals With Income From U.S. Possessions), Tax Foundation, APSM Proprietary Analysis
Disclaimer: This article contains general financial information for educational purposes and does not constitute professional advice.
Apostle Sports Media 