Puerto Rico is the only place a US citizen can legally pay 0% on capital gains — without renouncing citizenship.
Under Act 60’s Individual Investor decree (Chapter 2, formerly Act 22), bona fide residents of Puerto Rico pay a 0% Puerto Rico tax rate on Puerto Rico-source long-term capital gains and dividends. And because IRC §933 excludes Puerto Rico-source income from the federal return, that 0% is the whole story — no IRS layer on top. No other US jurisdiction offers this combination, because Puerto Rico is the only one with its own tax system inside US citizenship.
The window is closing: under Act 38-2026 (HB 505), decree applications submitted on or after January 1, 2027 pay a 4% rate on capital gains, dividends, and interest instead of 0%. Applications filed by December 31, 2026 lock in 0% through December 31, 2035, and existing decree holders keep the same 0% treatment until that date. If you’re evaluating the move, the difference between applying this year and next year is the entire 4%.
How the 0% rate actually works
Three pieces have to line up:
- The decree. You apply for an Act 60 Individual Investor decree with Puerto Rico’s DDEC. Once granted, it’s a contract with the government — protected through 2055, though the 0% rate itself runs only through 2035.
- Bona fide residency. You must pass all three residency tests under IRC §937 (detailed in IRS Publication 570) — the presence test (generally 183 days on the island), the tax home test, and the closer connection test. Fail any one in a given year and the benefits fall away for that year. Our residency guide covers what counts.
- Puerto Rico-source gains. Only appreciation that accrues after you establish residency is PR-source. That’s where most of the planning lives.
The trap: your old gains don’t come with you
Act 60 does not erase the gain you’re already sitting on. If you bought stock for $200,000 and it’s worth $2,000,000 the day you become a Puerto Rico resident, that first $1,800,000 of appreciation is still taxable by the IRS at federal capital gains rates when you sell. Only growth from $2,000,000 onward qualifies for the 0% Puerto Rico rate.
This is the single most misunderstood point about the program — and the reason timing matters so much. When you move, when you sell, and how the pre-move appreciation is documented and allocated determine whether the structure saves you seven figures or just complicates your filings. This applies equally to stocks, crypto, business equity, and real estate, each with its own sourcing quirks.
What it costs to hold the decree
- $5,000 annual decree filing fee to the Government of Puerto Rico
- $10,000 annual charitable contribution, split between two qualifying Puerto Rico nonprofits
- IRS Form 8898 in the year you establish bona fide residency
- Annual filings on both sides: federal Form 1040 with the §933 exclusion, Puerto Rico Forma 482 with Hacienda, and the annual decree compliance report to DDEC
- For applications from 2027 onward: a 6-year non-PR-residency lookback and registration of a Puerto Rico primary residence within 2 years
Whether the structure pays for itself depends on the size and timing of the gains you expect to realize after the move. Below a certain level, the fees and the annual compliance absorb the benefit. We model the actual breakeven before you commit to anything.
Stocks, crypto, and real estate: same rule, different mechanics
Publicly traded stock and crypto are the cleanest fit — the post-move appreciation of assets you hold personally can qualify as PR-source gain. Real estate located in the US stays US-source no matter where you live: selling a US rental property from Puerto Rico doesn’t get the 0% rate. Business equity depends on structure and where the value accrues. If a large share of your net worth is in one of these buckets, the sourcing analysis before you move is where the money is made or lost.
How we handle it — both sides, one CPA
Hiltzik CPA is a US CPA firm based in Puerto Rico that files both sides of an Act 60 engagement in-house: the US federal return with the §933 exclusion, residency documentation and audit defense, and the Puerto Rico Hacienda filings and decree compliance report. No coordinating two firms. The IRS examines Act 60 residency claims more aggressively every year — documentation from day one is the difference between keeping the 0% and having it clawed back with interest and penalties.
Schedule a call
Or call (787) 478-8820.
Frequently asked questions
Does Puerto Rico really have no capital gains tax?
For Act 60 Individual Investor decree holders who are bona fide residents, Puerto Rico-source long-term capital gains are taxed at 0% (for decrees issued under the rules in effect through December 31, 2026; 4% for later applications). Without a decree, Puerto Rico residents pay regular Puerto Rico capital gains rates — the 0% is a decree benefit, not a blanket rule.
Do I still pay the IRS on gains after I move?
Not on Puerto Rico-source gains — IRC §933 excludes them from your federal return. But appreciation that happened before you established residency remains US-source and federally taxable when you sell, and US real estate gains stay US-source regardless.
What about the 183-day requirement?
The presence test is one of three bona fide residency tests under IRC §937. You generally need 183 days on the island each year, plus a Puerto Rico tax home and a closer connection to Puerto Rico than to any US state. All three must be met every year.
Is it too late to get the 0% rate?
Not yet. Applications submitted by December 31, 2026 lock in the 0% rate and are grandfathered. From January 1, 2027, new applicants pay 4% — still attractive, but a decree application typically takes time to prepare properly, so the realistic runway is shorter than the calendar suggests.