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PR taxes in IRA distributions?

Here in the states when I take out money from a regular IRA, I have to pay Federal and state taxes. When I move to PR, will I need to pay PR taxes on the money I get from IRA or just the federal taxes?

Anybody in the same boat that can tell me?

Rey, I believe because the income is derived from US mainland, you do not have to pay PR taxes on it.  I could be wrong but I'll search further.

Income derived from the mainland is excluded, but the key question is, if it is considered as income derived from the mainland. IRA is very similar to 401K and 403B, so I assume they are all under the same situation. I don't mind the Federal which is mandatory, but a state tax by PR would really hurt since PR taxes on income are higher than in the majority of the states. All 3 are pre-tax savings that grow tax free until you get the money out so I assume they are all treated the same. Company pensions are a different animal since they are clearly originating in the US mainland so not up to debate by PR Hacienda.

Anybody in PR getting income from a 401k, 403B or regular IRA that can tell me if you file PR taxes on it?

This is probably a good question for many in the mainland considering moving to PR.

Rey -

Interesting question so I did some research online and found the following from an article discussing tax effects of mainlanders moving to PR.  The author states that your IRA distributions are taxable by U.S. and PR:

Withdrawals from an IRA, 401(k), or other US tax-deferred retirement account would not be covered by Act 22. So moving to the island won’t lessen the tax on withdrawals.  The situation is the same with Social Security and other pension income.  Puerto Rico has its own IRA system, with both traditional and Roth plans, but it is distinct from the US IRA system. Income from employment in Puerto Rico cannot be
contributed to a US IRA and vice versa.

For a resident of Puerto Rico, a distribution from a US Roth IRA would be taxable by the Puerto Rican government. That is, unless the US Roth IRA is liquidated and the proceeds are used to contribute to a Puerto Rican Roth IRA (subject to contribution limits, which are similar to the US). The opposite is true as well.


A distribution from a US traditional IRA to a Puerto Rico resident would be taxable by both the US and the Puerto Rican government, unless it is liquidated and the proceeds are used to contribute (subject to contribution limits) to a Puerto Rican traditional IRA, in which case the distribution would only be taxable by the Puerto Rican government.
Again, the opposite scenario is true as well. For taxable distributions, the availability of a credit from either government for tax paid to the other prevents double taxation, and you end up effectively only paying the higher rate.

That was some good research, but one question remains in my mind, about your statement

SawMan :

Rey -
For taxable distributions, the availability of a credit from either government for tax paid to the other prevents double taxation, and you end up effectively only paying the higher rate.[/i]

Typically I believe this refers to taxes payed to another state, I do not think this applies to Federal Taxes. Are you saying that PR will give me credit for the Federal taxes I pay on the withdrawals from the IRA and that I would then not need to pay PR taxes?

Texas will give credit for New Jersey for example but not for taxes payed on Federal, so this is confusing.

Can you explain?

ReyP :

That was some good research, but one question remains in my mind, about your statement

SawMan :

Rey -
For taxable distributions, the availability of a credit from either government for tax paid to the other prevents double taxation, and you end up effectively only paying the higher rate.[/i]

Typically I believe this refers to taxes payed to another state, I do not think this applies to Federal Taxes. Are you saying that PR will give me credit for the Federal taxes I pay on the withdrawals from the IRA and that I would then not need to pay PR taxes?

Texas will give credit for New Jersey for example but not for taxes payed on Federal, so this is confusing.

Can you explain?

That is important isn't it and I don't know more than what the author stated!!

Thank you SawMan, that was good work.

There must be someone else in this Forum that is in that same boat, a lot of people coming to the island must have IRA or 401K that they do withdrawals from, so I would agree that this is very important to a lot of people in the forum.

Lets hope someone can answer that.

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