Act 60 Puerto Rico: Real Estate, Tax Benefits & Requirements

What Is Act 60 and Why Does It Matter for Real Estate?

Act 60 of 2019 — Puerto Rico's Individual Resident Investor program — is the most powerful tax incentive available to any US citizen without renouncing citizenship or relocating abroad. It offers a 0% capital gains rate on appreciation that accrues after moving to Puerto Rico, 0% tax on interest and dividends, and a 4% flat corporate rate on qualifying export service income. For high-income earners, the tax savings can reach seven figures annually. For investors realizing large capital gains — on stocks, crypto, business sales, or real estate — the program can eliminate a tax liability that would otherwise run into the millions.

The connection to real estate is direct and mandatory. Under current Act 60 regulations, decree holders must purchase a qualifying primary residence in Puerto Rico within two years of their decree approval date. That requirement transforms Act 60 from a pure tax play into a real estate transaction — and given the magnitude of the tax savings involved, most decree holders approach that real estate purchase with significant capital and high standards.

The result is a sustained, well-capitalized wave of demand concentrated in Puerto Rico's best neighborhoods. Condado, Dorado Beach, Miramar, and Old San Juan have all seen meaningful appreciation driven by Act 60 buyer demand since the program launched. For buyers who are themselves decree holders, finding the right qualifying property quickly and efficiently is both a legal requirement and a financial priority. For investors who are not Act 60 holders, understanding Act 60 demand is essential to understanding why Puerto Rico real estate has consistently outperformed expectations.

The Core Tax Benefits: What Act 60 Actually Delivers

The headline numbers are accurate but require context to understand fully. Under Section 933 of the Internal Revenue Code, income sourced from Puerto Rico by bona fide Puerto Rico residents is excluded from US federal income tax. Act 60 builds on that foundation to deliver four specific benefits for Individual Resident Investor decree holders:

• 0% capital gains tax on appreciation that accrues after the decree holder establishes Puerto Rico residency. Pre-move appreciation is still subject to a reduced 5% exit tax.
• 0% tax on dividends and interest sourced from Puerto Rico or generated after the move on qualifying investments.
• 4% flat corporate rate on export services income (applies under the Act 60 business incentive; relevant for self-employed professionals and business owners).
• No US federal income tax on Puerto Rico-sourced income for bona fide residents, by operation of IRC §933.

What Act 60 does not eliminate: W-2 wages earned from a US mainland employer remain subject to federal income tax and FICA regardless of Puerto Rico residency. The program delivers its full benefit to investors, traders, crypto holders, business owners, and those with significant passive income — not to salaried employees.

The IRS three-part bona fide residency test — presence test (183+ days in Puerto Rico), tax home test (primary place of business in PR), and closer connection test (strongest ties to PR) — must be met each calendar year to maintain eligibility. Failure to meet these tests in any year can result in retroactive taxation of that year's gains. Most decree holders track their days carefully and structure their lives to pass comfortably.

The Real Estate Requirement: What Qualifies

The primary residence requirement is precisely defined. To maintain Act 60 compliance, decree holders must:

1. Purchase a residential property in Puerto Rico within two years of the decree approval date.
2. Hold the property as their primary residence — not as a rental, investment, or secondary property.
3. Take title in their personal name or a revocable trust where they are the sole grantor and beneficiary (LLC ownership does not qualify).
4. Maintain the property as a primary residence for the duration of the decree (15 years, with a 15-year renewal option).

The two-year clock starts from the decree approval date — not the application date, and not the date you move to Puerto Rico. Many applicants make the mistake of assuming the clock starts when they arrive on the island; if the decree takes 18 months to process, they may have only six months remaining to close on a qualifying property. Understanding the timeline is essential to avoiding a compliance gap.

The property does not need to meet any minimum value threshold. A modest apartment in Bayamón qualifies on the same terms as a $5M oceanfront penthouse in Condado. What matters is that it is purchased in the decree holder's name, used as their primary residence, and maintained as such throughout the decree term.

Where Act 60 Buyers Buy in Puerto Rico

Act 60 decree holders have concentrated in a handful of neighborhoods that combine lifestyle quality, prestige, and practical livability. Understanding where the community has settled helps new decree holders identify where inventory is most competitive — and where off-market access matters most.

The Application Process and Timeline

The Act 60 Individual Resident Investor decree is administered by Puerto Rico's Department of Economic Development and Commerce (DDEC). The application requires:

• Proof of Puerto Rico residency (utility bills, driver's license, voter registration)
• Proof that you have not been a Puerto Rico resident for the 10 years preceding the application
• A $5,000 application fee (non-refundable)
• A commitment to make an annual charitable contribution of $10,000 to Puerto Rico nonprofits
• The two-year clock to purchase a primary residence begins at approval

Processing times have ranged from 6 to 24 months depending on application volume and DDEC staffing. Most applicants work with a Puerto Rico attorney experienced in Act 60 to manage the process. Annual compliance reports must be filed with DDEC throughout the decree term, documenting continued residency and charitable contributions.

The total annual compliance cost — including attorney fees, accounting, charitable contribution, and DDEC filings — typically runs $20,000–$28,000 per year. Against the tax savings available to a decree holder with $500,000 or more in annual capital gains or investment income, this cost is negligible. For individuals with lower income levels, the break-even analysis is less compelling.

Act 60 vs Staying on the Mainland: The Real Numbers

The financial case for Act 60 is most compelling for investors and business owners realizing significant capital gains. A California resident with $1,000,000 in long-term capital gains pays approximately $238,000 in combined federal and state tax. The same gain realized by a bona fide Puerto Rico resident under Act 60: $0 on post-move appreciation.

For a New York resident with $500,000 in qualified dividends, the combined federal and state tax burden is approximately $115,000 annually. Under Act 60, that same income is untaxed. Over a 10-year decree term, the cumulative savings on dividend income alone can fund a Condado penthouse purchase several times over.

The comparison is less clear-cut for W-2 employees, whose salary income remains subject to federal tax regardless of Puerto Rico residency. And the lifestyle adjustment — 183+ days per year on the island, primary ties to Puerto Rico — is real and should be honestly evaluated. But for the target candidate: a business owner, investor, crypto trader, or finance professional with $200,000 or more in annual investment income, the financial case for Act 60 is difficult to argue against.

Off-Market Access: Why It Matters for Act 60 Buyers

Act 60 buyers face a specific challenge that distinguishes them from typical real estate purchasers: they are operating under a mandatory two-year deadline to close on a qualifying primary residence. In a market where the best properties in the highest-demand neighborhoods regularly sell off-market — without ever appearing on Zillow, the Puerto Rico MLS, or Clasificados — buyers who rely solely on public listings are structurally disadvantaged.

The most sought-after buildings in Condado, Dorado, and Miramar have active ownership communities where units are quietly offered to known buyers before any public listing process begins. An owner in Gallery Plaza or The Normandie who decides to sell will often contact a trusted broker or their personal network first. A buyer who is not part of that network will never know the unit was available.

Our concierge service exists to solve this problem. We maintain ongoing relationships with owners in the buildings that Act 60 buyers most frequently target, and we proactively match buyers with off-market opportunities that fit their decree timeline, budget, and lifestyle requirements. If you are approaching the two-year deadline, or if you are early in your decree and want to build a shortlist before committing, that is precisely what the VIP list is designed for.

Go Deeper: Our Three Act 60 Guides

This page covers the essentials. Each of the three articles below goes into full detail on one specific aspect of Act 60 real estate.

Frequently Asked Questions