Income taxes

You still need to file your normal US income tax form every year + what ever income tax PR has.

Remember no matter where in the world you live you have to file your US income tax form. We are in the Dominican REpublic but still file every year.  Also remember PR is a US territory and certainly bound by US tax laws.

Bob K

Thanks for your reply to my post. I was confused because I used to live and work in Puerto Rico, and I only had to file the PR taxes. My dad relocated to Puerto Rico after retirement and used to fill out both, as he had property income from NY. Once he sold all properties outside of PR, and his investments were tax free (social security, and fixed income investments in PR), he no longer had to file either of the tax forms. I will check with a CPA, the IRS and Hacienda (PR Taxes).

My pension income and any UBS investments outside of PR will require me to file a US Federal tax form. My dad advised I not invest in Puerto Rico as there are economic problems there now. If none of my income is from PR, I will probably not have to file PR taxes, and once I sell my home in California, I should not have to pay CA taxes, either.

RuthIvette wrote:

At the present time, I live and work in California. When I retire, I hope to relocate to San Juan Puerto Rico. I will retire with a California teacher's pension, some IRA and Roth Ira funds. What income taxes should I be prepared to pay once I am domiciled in Puerto Rico?

Yes speaking with a CPA in PR is a great idea, from what I have heard so far, you will be paying Federal for the pension and for the IRA. Social Security I am not sure if you will, The Roth IRA is a little different if you apply for ACT 20 in Puerto Rico. As you stated, you will pay State tax for California in the first year, but after that you will be a PR resident.

Definitely speak with a PR-based CPA or tax attorney.

I am currently working with a CPA in PR and a Financial Advisor (CFP) here in the US. Here is what I found so far:

IRA that was created in US will pay Federal taxes for any distributions as regular income even if I move to Puerto Rico. However anything you do not take out (distribution) continues to grow tax free.

Anyone with a ROTH IRA has already payed taxes, so all distributions in US and Puerto Rico are tax free. I need to clarify, but it seems all growth is also tax free. My Financial Advisor is thinking that maybe I should convert my IRA to a ROTH IRA, but we have to do the numbers, I do not care much to pay 100K in taxes for the conversion. No decision yet.

As to Social Security Benefits, here is what CPA said:
"Social security – Puerto Rico excludes social security from taxable income. Therefore you will not pay PR taxes on social security, depending on the state you live and current state tax law this may be an advantage for state tax purposes. For federal tax you have to include this as income even if living in Puerto Rico." ---- I asked him to re-explain it, waiting on return email.

There is also a twist about inheritance that I still have to clarify, it seems that the fact that I was born in PR, moved to the US and I am returning back to PR has some bearing. Not yet sure what it is or if positive or not. Waiting on more info.

*** I am working via email and being charged by the hour for answers, but I also have a face to face appointment with the CPA this coming Tuesday. So I should have more info. My CFP is free, he is a friend of mine.

Thank you. Rey, your info. is pretty much my understanding as well.  Also, the social security that is included in Fed. income that is taxable would depend on the amount of your other taxable income.  So part could be nontaxable if your other income is within a certain limit.

Yes, but I wanted to point out that taxable means it is subject to taxation, but you may still end up paying nothing or very little based on total income.

Yes

Thank you. This information is helpful. Please keep me posted. I too would love to convert my IRA to a Roth IRA but the taxes are too high now as I am still working. The windfall elimination act cuts into my social security benefits and I will have to give my ex-spouse part of my California teacher's pension. Therefore, I have to be careful. I wish I could put more than $6500 into my Rooth IRA. I was not born in Puerto Rico, but my dad was and he has exemptions on passing inhertance that I will not have. Again, thanks for the information. Please keep me posted.  Ruth