Bona Fide Resident of Puerto Rico

As a bona fide resident of Puerto Rico, you are a U.S. citizen who meets specific residency criteria under Internal Revenue Code (IRC) Section 933. To qualify, you must satisfy the presence test, not have a tax home outside Puerto Rico, and maintain a closer connection to Puerto Rico than to the United States or any foreign country during the tax year. These requirements are detailed in IRS Publication 1321 and Form 8898.

Qualifying as a Bona Fide Resident

• Presence Test: You must be physically present in Puerto Rico for a sufficient period during the tax year.
• Tax Home: You must not have a tax home located outside Puerto Rico.
• Closer Connection: You must have a closer connection to Puerto Rico than to the U.S. or any foreign country.

Special Rules for Year of Move

For the year you move from Puerto Rico, you may still qualify as a bona fide resident for the portion of the year before your move if you meet these conditions:

• You are a U.S. citizen.
• You were a bona fide resident of Puerto Rico for at least two tax years immediately before the move.
• In the year of the move, you ceased to be a bona fide resident and ceased to have a tax home in Puerto Rico.
• You had a closer connection to Puerto Rico than to the U.S. or any foreign country during the part of the year before moving.

Filing Requirements

Under IRC Section 933, U.S. citizens who are bona fide residents of Puerto Rico and receive income from sources outside Puerto Rico or as a civilian or military employee of the U.S. Government in Puerto Rico must file a U.S. Federal income tax return (Form 1040 or Form 1040-SR).

Special Adjustments and Credits

• Excluded Income: Income earned in Puerto Rico is generally excluded from U.S. federal income tax under Section 933.
• Foreign Tax Credit: You may claim a Foreign Tax Credit for taxes paid to Puerto Rico on income sourced there, including military pay, even if services were performed outside Puerto Rico.
• Child Tax Credit: Special rules apply; refer to Form 1040 Schedule 8812 for details.
• Earned Income Tax Credit (EITC): Not available to bona fide residents of Puerto Rico.
• Qualified Business Income Deduction (QBI): Not available for self-employment income excluded under Section 933.

Form 8898 Requirements

If you move from Puerto Rico during the tax year and meet the criteria for being a bona fide resident for part of the year, you must file Form 8898 to notify the IRS. For example, if you moved from Puerto Rico to Florida in May 2024 and your worldwide gross income exceeds $75,000, you must file Form 8898 for the 2024 tax year.

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Disclaimer: Always verify details with current Federal or State Department of Revenue Forms and Instructions. For complex situations, consult a CPA or tax attorney.