Puerto Rico Tax Laws
The island of Puerto Rico occupies an anomalous status. Puerto Ricans have enjoyed U.S. citizenship since 1917. But as a self-governing, unincorporated territory, the island is partially inside and partially outside American law. This picture leads to a number of misconceptions, especially regarding taxation.
Other People Are Reading
-
Sales Taxes
-
Most visitors to Puerto Rico are limited to encountering local sales taxes. The general sales tax is 5.5 percent, but local municipalities have the option of imposing an additional 1.5 percent at their discretion. In addition, there is a different 11 percent tax on rented rooms in hotels with casinos, a 9 percent tax on rented rooms in hotels without casinos and 7 percent on rented rooms in small inns. Hotels in San Juan have an additional surcharge of $3 per room and $5 per person.
Property Taxes
-
The government of Puerto Rico levies a 2.03 percent property tax on personal property and a 4.03 percent tax on real property. Local municipalities can levy additional property taxes. The combined property tax for real property in San Juan is 8.05 percent.
-
Capital Gains
-
Short term capital gains are those on assets held less than six months, and are taxed a flat rate of 29 percent. Long term capital gains are taxed at a flat rate of 20 percent. There is a mandatory withholding of 25 percent from the sale of any property by a non-resident.
Income Taxes
-
Income taxes for residents are progressive, but employ a system unfamiliar to most Americans. They start at 7 percent for those making less than $2,000 annually, but from there they employ a formula of a minimum payment plus a percentage of the excess. For example, a man earning $45,000 a year would fall into the bracket for an income of between $30,001 and $49,999, and is required to pay a $3,590 minimum, plus 28 percent of the excess over $30,000 (the income minus $30,000). That excess is $4,200, for a total tax bill of $7,790.
Federal Taxes
-
Puerto Rico is subject to some federal taxation, but not the federal income tax, as is often believed. Only federal employees and companies doing business with the U.S. government are obliged to pay federal income taxes. They do pay the FICA taxes for Social Security and Medicare, as well as federal import and export tariffs.
-
Resources
- Photo Credit Wikimedia Commons
