Retiring to Puerto Rico for tax purposes, pros and cons

Retiring to Puerto Rico for tax purposes, pros and cons

Sean Flynn and Sarah Lindsey semi-retired and moved to Puerto Rico
Sarah Lindsay

  • Moving to Puerto Rico comes with some great financial benefits.
  • Only wealthier individuals and businesses can see most of the benefits.
  • The downside is health care, which can be overwhelming for the elderly and those with medical conditions.

When a rare snowstorm knocked out power to more than 4.5 million homes in Texas in February 2021, Austin residents Sarah Lindsey and Sean Flynn were looking for a change of scenery. This experience made them realize that they wanted to go south.

“I was just at the point where I wanted to change where I’d lived in Austin for 20 years,” Flynn said. “We were looking for some kind of adventure, a pirate adventure, and Puerto Rico was perfect.”

Lindsey, a former teacher, and Flynn, a semi-retired IT consultant, moved to Humacoa, Puerto Rico in 2021. While they live in a condo a few hundred feet from the beach, they say there are also financial incentives for people to move. from other parts of the United States.

But it may not be an island The couple said the island is in a health crisis for everyone, especially if you are elderly or have health problems that require regular medical care.

Puerto Rico’s allure comes with some strict rules

One incentive for Lindsey and Flynn to move to Puerto Rico was the territory’s Act 60 tax incentives.

Under Act 60, there is no tax on capital gains made while living in Puerto Rico for people who move to the island. That’s big for Flynn and Lindsey, who have a lot of stock and cryptocurrency investments. If the cryptocurrency goes up while they live there, they won’t have to pay taxes on their gains. The same goes for the condo they bought on the island.

There are many reasons to love Puerto Rico.
Sarah Lindsay

In addition, income is taxed at 4% for individuals and businesses, compared to a rate of 10% to 37% for individuals and small businesses on the mainland. There is also a 75% discount on property tax. Those benefits last for 15 years, but Flynn and Lindsey were told they might be able to renew after 15 years.

There is no official minimum residency requirement for tax benefits. Flynn was advised, however, that if his business had been on the island for less than three years, it would likely trigger some heightened scrutiny from the IRS.

The thing is, to take advantage of these benefits, you have to be what they call a “blessed” resident of Puerto Rico. This includes registering to vote in Puerto Rico, getting a local driver’s license, and having all your essentials on the island, including cars, boats and, of course, housing. To qualify for tax credits, a resident must also show that they spend more than half of the year – at least 183 days – in Puerto Rico.

The benefits attract wealthier people to invest in Puerto Rico

The benefits of living in Puerto Rico are prompting wealthier Americans like Flynn to move to the island, buy homes, spend money, and even incorporate their businesses on the island. He runs an IT consulting business called AFI Technologies.

Puerto Rico claims to further emphasize the desire of more affluent American residents people who signed a 15-year decree to give $5,000 to the government and an additional $10,000 annually to a charity on the island.

Puerto Rico’s tax incentives aren’t for everyone.
Sarah Lindsay

As Lindsey explained, any benefit from the tax breaks could be wiped out for low-income people with a $15,000 annual contribution back to the island.

Movement is not for everyone

Another issue that may deter some from moving to Puerto Rico is the state of the health care system.

The island was already in the midst of a “healthcare crisis” in 2015, with the system on the verge of collapse. The situation worsened after Hurricane Maria hit the island in 2017 and nearly 15% of Puerto Rico’s health workers left the area the following year.

Although Lindsey and Flynn have health insurance, they haven’t seen a doctor in the three years since they moved there. There is a special provision in the insurance cover to bring them back to the mainland in case of a major medical emergency.

Hurricane Maria has worsened Puerto Rico’s health care crisis.
AFP Contributor/Getty Images

The local and US governments are working to improve healthcare, but right now moving to Puerto Rico is still not ideal for everyone.

The issue may even force Lindsey and Flynn to give up full-time living in Puerto Rico in a few years and switch to a part-time model.

The couple had to make some adjustments to their island life

Moving to Puerto Rico also came with other adjustments.

Some of Lindsey’s favorites, like Pillsbury crescent rolls, are harder to find at mainland grocery stores.

Even shopping on Amazon is a new experience, as packages can often take up to a month to arrive.

Puerto Rico’s beauty comes with some adjustments for mainlanders.
Sarah Lindsay

Lindsey mentioned that you have to get a little “MacGyver-ish” and creative to get some of the things you want or need. For example, the couple has an elderly dog ‚Äč‚Äčnamed Max, who needs special medication they can’t find on the island, and struggled to get it mailed from the mainland to Puerto Rico. They finally found the drug at Tractor Supply Co. a retailer of farm supplies and pet products.

Despite the challenges, it’s still heaven

Of course, living on an island has many other advantages.

The couple noted that there are many activities in Austin that they won’t return to, such as sailing, surfing, snorkeling and swimming with sea turtles, nurse sharks and dolphins.

A sea turtle while snorkeling in Puerto Rico.
Sarah Lindsay

There are also many WhatsApp groups in their area for people with similar tastes and hobbies to make new friends. For example, if you’re an intermediate golfer outside of Puerto Rico and you’re looking for similar people in Puerto Rico, there’s a WhatsApp group for that.

They also noted the appeal of the diversity of the geography, which includes mountains, rainforests, jungles and beaches.

“It’s got a little bit of everything as a small island,” Lindsey said.

Don’t be sorry, but be prepared

Three years later, Lindsey and Flynn have no regrets and would do it again. However, they encourage people considering moving to think about how they will adapt to island life.

“Realize you’re on an adventure and be flexible,” Flynn said, adding that it took him three years to get the business license. “If it’s going to stress you out, don’t. Everything moves at its own pace here.”

The couple suggests weighing the pros and cons before moving to the beach.

“The financial reasons were huge and all of that works in our favor, but it’s all the intricacies around it and doing all that stuff that we couldn’t get back in Austin,” Flynn said. “If you’re a nature lover, this is your paradise.”

If you have moved to Puerto Rico for tax benefits and would like to share your experience, please contact this reporter. [email protected].

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