In order to be able to apply for tax exemptions from the IIA in your tax return, you must be a “bona fide resident” of Puerto Rico. The following three factors must be true for a taxpayer to be considered a bona fide resident:
- The taxpayer lives in Puerto Rico for at least 183 days of a tax year
- The taxpayer cannot own a tax home in another country during the tax year
- The taxpayer cannot have closer ties The United States or another country as well Puerto Rico
Benefits for bona fide residents of Puerto Rico Those eligible under the IIA include:
- Tax exemptions for all dividends from income tax
- Tax exemptions from income tax on interest
- Tax exemptions for short-term and long-term investment income obtained after the taxpayer has achieved bona fide resident status Puerto Rico
Despite being US territory, it is a bona fide resident of Puerto Rico means that a taxpayer would not have to report income from sources within the country. However, as a U.S. person, a taxpayer who lives in Puerto Rico remains subject to federal income tax on income from avenues OUTSIDE of Puerto Rico. This means that cryptocurrency revenue derived from a U.S. source is subject to federal income tax.
The reason many taxpayers are targeted by the IRS for repatriation after Puerto Rico For the IIA, every taxpayer who has been filed under the law cannot legally be regarded as a bona fide resident.
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Dave Klasing Esq.
SOURCE Tax Law Offices of David W. Klasing, PC