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Puerto Rico Tax Laws

Although Puerto Rican citizens enjoy citizenship of the United States of America, their tax laws are not the same as ours. There are differences for sales tax, property taxes, capital gains, and federal taxes. While they can enjoy being citizens of the United States, people living in Puerto Rico have a little bit more to do when it comes to tax time.

First, sales taxes in Puerto Rico are different from that in the United States. The general sales tax in Puerto Rico is 5.5% and municipalities have the option of increasing this sales tax by up to 1.5% at their own discretion. The taxes for places such as hotels and casinos, like the United States, are much higher than the initial 5.5% sales tax.

Second, property taxes in Puerto Rico are different with the Puerto Rican government levying 2.03% tax on personal property and 4.03% annual taxes on real property. Local levies are allowed to make these percentages higher if they elect to. For instance, the tax rate on real property in San Juan is 8.05%.

Capital gains are also handled differently in Puerto Rico. The rate on short-term capital gains is 29% while the rate for long-term capital gains are taxed at 20%. There is also a required tax of 25% for all property sold by non-residents.

Income taxes start at 7% for those making $2,000 or less in a year. After $2,000 income, a base fee is charged for taxes as well as a percentage rate of the excess of income. Federal taxes are different for Puerto Rico as well. Puerto Rico is accountable for some federal taxes, but they do not have to pay the federal income tax so long as they are not government employees or employees working between Puerto Rico and the United States. However, people in Puerto Rico do pay taxes associated with medicare and social security, and also taxes on federal imports and exports.

Tax laws in Puerto Rico vary from those of the United States. While they enjoy American citizenship, most municipalities enforce higher tax laws than those in the United States. This is due to the United States receiving profits from the taxes already set in stone. If the municipalities didn't raise the taxes, they would generate no revenue. Although they do not have to pay federal income taxes, people living in Puerto Rico have a bit more to worry about when it comes to tax time.

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