0% Capital Gains Tax in Puerto Rico: How Act 60 Works in 2025

How Does the 0% Capital Gains Tax Rate Work Under Act 60?

The most attractive feature of Puerto Rico's Act 60 is straightforward: assets you purchase after becoming a bona fide Puerto Rico resident, and hold while living in Puerto Rico, appreciate completely tax-free. When you eventually sell, any gain that accrued during your residency is taxed at 0% by Puerto Rico.

For investors with large stock portfolios, real estate holdings, private equity stakes, or cryptocurrency positions, this can translate into millions of dollars in legitimate tax savings.

How Is Capital Gain Split Between Pre- and Post-Move?

The IRS uses a concept called "sourcing" to determine which portion of your capital gain is taxable. Your total gain is divided into two parts:

• Pre-move gain: Appreciation that occurred while you were a U.S. mainland resident. This is still subject to federal capital gains tax at standard rates (up to 20% + 3.8% NIIT).
• Post-move gain: Appreciation that occurred after you established bona fide Puerto Rico residency. This is taxed at 0% in Puerto Rico and is generally excluded from federal income tax.

What Does the Gain Split Look Like in a Real Example?

Suppose you bought 10,000 shares of a company at $10/share ($100,000 cost basis). When you move to Puerto Rico, the stock is worth $500,000 — meaning you have $400,000 in pre-move gains. You hold the stock for two more years, and it grows to $900,000.

• Pre-move gain: $400,000 — taxable by IRS at federal rates
• Post-move gain: $400,000 — taxed at 0% under Act 60

Federal tax saved on the post-move gain (at 23.8%): approximately $95,200.

Which Assets Qualify for the 0% Capital Gains Rate?

Any asset purchased after establishing Puerto Rico residency can benefit from the 0% rate, including:

• Stocks and mutual funds
• Cryptocurrency (Bitcoin, Ethereum, etc.)
• Real estate (investment property)
• Private equity and venture capital interests
• Business ownership stakes
• Options and warrants

What Does the IRS Scrutinize in Act 60 Capital Gains Cases?

The IRS has dedicated enforcement resources focused on Act 60. The most common audit triggers are:

• Selling assets shortly before establishing residency and claiming Puerto Rico treatment
• Not genuinely spending 183+ days in Puerto Rico
• Maintaining primary home, family, and business ties in a U.S. state
• Not purchasing residential property within 2 years as required by decree

How Should You Plan Your Move to Maximize the Tax Benefit?

The order of operations matters enormously. You must: establish genuine Puerto Rico residency first, then purchase new assets or let existing assets continue to appreciate under Puerto Rico rules. Selling before the move, or immediately after without proper documentation, can expose you to the full federal tax.

I-Taxplan's team helps clients structure the timing of their move, asset purchases, and sales to maximize legitimate Act 60 benefits while staying fully compliant. Learn more about our Act 60 services →