RTS #053 Sure…move to Puerto Rico
To heck with the other side of the fence, have you ever heard about how green the grass is in Puerto Rico?
I’ve never been to Puerto Rico; I hear it’s a beautiful place. I do, however, hear ABOUT Puerto Rico way more often than I’d like because of the possibility of only paying 4% federal taxes if you own property on the island. Sometimes, this will come up in disguise under Act 60, but the short version is this: there is a specific set of circumstances wherein a person can, in fact, reduce their federal tax liability to only 4% by making Puerto Rico their home.
Unfortunately, this gets presented as “everyone should buy real estate in Puerto Rico; it’s easy to only pay 4%!” The reality is a bit different.
I’ve personally talked to someone who is in Puerto Rico, living their best life, legally avoiding massive federal and state tax bills…but that doesn’t mean it’s for everyone. In reality it’s for almost no one. There are a lot of hoops to jump through. A lot of fine lines you have to walk. A lot of significant costs you have to incur to make it all work.
It’s definitely an area where you need someone, or more likely a team of someone, who specializes in this specific strategy if you want to have anyone hope of doing it right.
So why are we talking about it in this newsletter?
It’s important to know what’s out there, even if you’re never going to apply it. More and more of these “exotic” strategies are being commonly talked about on social media, and at some point, you will get questions. You don’t have to be an expert on all of these, but awareness is helpful. Here are some bullet points to remember about Puerto Rico:
- Plan on $50k+ in legal fees
- The number of days you are allowed to be in the US will be restricted
- You have to own property in Puerto Rico
- You have to make annual charitable donations in Puerto Rico
- The IRS aggressively goes after people who use this strategy and don’t correctly toe the line
Also, remember that your clients don’t care if you have all the answers, just whether you are committed to helping them find the answers they need. Expand your knowledge but focus on becoming an expert in the areas that are most applicable to your clients.
Happy Tax Planning!
P.S. Steven will be discussing this and other “exotic” tax strategies live at a free webinar on June 19th. Claim your spot here.