Let’s run the math. You sell a $2 million portfolio—stocks, crypto, real estate—at a 50% gain. Congratulations, you just made $1 million. Then the IRS walks in with open arms. Depending on your bracket, federal long-term capital gains alone can take 20%. Add the Net Investment Income Tax (3.8%) and, if you’re in a high-tax state like California or New York, stack another 10–13%. In total, $300,000 to $400,000 of that million evaporates before you touch it.
That’s the price of not living in Puerto Rico.
Under Puerto Rico’s Act 60, qualified investors pay 0% capital gains on gains realized after becoming a bona fide resident. Not deferred. Not delayed. Zero. That’s a beach house in Dorado, your kid’s future tuition, or seed capital for your next venture—all vaporized if you’re still paying stateside.
This isn’t about tax dodging. It’s about tax planning. The ultra-wealthy think in decades, not quarters. They don’t just make money—they keep it.
Act 60 in Plain English
Puerto Rico’s Act 60 is the island’s incentives law, a consolidation of earlier programs (Acts 20 and 22). It was designed to attract investors and entrepreneurs by offering them what the mainland doesn’t, world-class tax incentives, legally baked into U.S. code.
Here’s the core of what matters to investors and entrepreneurs:
- 0% Puerto Rico tax on certain post-residency capital gains, interest, and dividends.
- 4% corporate tax rate for businesses that export services from Puerto Rico to clients outside the island.
- 100% Puerto Rico tax exemption on dividends paid from your Puerto Rico entity.
Act 60 isn’t a loophole. It’s a policy. Congress blessed it when it wrote the tax code, and it’s been vetted repeatedly. Puerto Rico is the only place under the U.S. flag where the math looks this good.
What a Million Really Means
Think about an extra million dollars not as a headline number but as opportunity cost.
- As a Founder: You sell your SaaS business and clear $5 million. In California, you’re left with about $3.2 million after combined federal and state taxes. In Puerto Rico, the same exit—post-residency—could leave you closer to the full $5 million. That’s the difference between a second act funded and a second mortgage delayed.
- As a Trader: You make $1 million in crypto gains. On the mainland, you send $300,000 to $400,000 to the IRS. In Puerto Rico, you keep it. That’s dry powder for the next bull run—or the safety net that keeps you from panic selling when the market dives.
- As an Investor: You flip a property portfolio and net $2 million. Mainland tax: about $700,000 gone. In Puerto Rico: you keep the full $2 million. That’s equity for your next development instead of a check to Washington.
Every dollar you lose to taxes is a dollar you don’t have working for you. Wealth isn’t just about making money—it’s about compounding it. And compounding doesn’t care about your gross. It cares about what you keep.
Why Puerto Rico?
Three reasons:
- It’s legal and transparent. Unlike exotic jurisdictions or questionable offshore structures, Puerto Rico is U.S. soil. The courts, the currency, the oversight—it’s all U.S. based. Your bank accounts are domestic. Your compliance is with the IRS and Puerto Rico’s Hacienda, not an island you’ve never heard of.
- It’s time-bound. For individual investors, the 0% capital gains incentive is set through 2035. That’s a window. If you’re looking at a big liquidity event in the next decade, the clock is ticking.
- It’s overlooked—but not forever. The big funds, the family offices, the sophisticated traders—they’re already here. The wave of individual investors is still building. But like any incentive program, the more popular it becomes, the more likely Congress or Puerto Rico trims the sails.
The Catch: Execution Matters
Of course, there’s no free lunch. Act 60 works, but only if you execute correctly.
To qualify as a bona fide Puerto Rico resident under the Individual Investor decree, you need more than a P.O. box and an Instagram of palm trees. You need to live here, spend at least 183 days on the island, establish your tax home here, and demonstrate that your “closer connection” (family, business, community ties) is here.
Businesses must show substance. That means Puerto Rico books, Puerto Rico bank accounts, and often Puerto Rico employees once revenue thresholds are met.
Then there’s compliance—annual reports, charitable contribution requirements, decree fees, Puerto Rico tax returns, and U.S. informational filings. Miss one, and the savings evaporate.
The difference between a headline and a headache is details. And the IRS is watching. Residency and sourcing audits have increased. A single misstep—a missed report, an overstated claim, a residency test you can’t substantiate—can turn your 0% into an expensive back tax bill.
Two Paths
Let’s imagine two investors, both with the same $1 million gain.
Investor A (Mainland): Sells, pays $300,000+ in taxes, keeps $700,000. Net worth grows slower.
Investor B (Puerto Rico under Act 60): Sells after becoming a bona fide PR resident, pays $0 in Puerto Rico tax. Keeps the full $1 million. That extra $300,000+ stays invested, compounding year after year.
Fast forward a decade at a modest 7% return:
- Investor A’s after-tax pot grows to ~$1.4 million.
- Investor B’s grows to ~$2 million.
That’s a $600,000 gap created by nothing more than tax policy.
The Bigger Point: Work the Same, Keep More
Here’s the reality—you don’t need to grind harder to make more. You need to keep more of what you’ve already earned.
We live in an age obsessed with productivity hacks—wake up earlier, stack side hustles, squeeze more hours into the day. That’s running faster on the same treadmill. Act 60 offers a different lever: stop giving away 30–40% of your wealth to taxes unnecessarily.
The ultra-wealthy don’t just chase income. They engineer their jurisdictions. They understand the power of where you live and operate. Puerto Rico is one of the few places where middle-market entrepreneurs, traders, and investors can play the same game, legally and visibly, under the U.S. flag.
So what could you do with an extra million dollars?
Buy more time. Buy freedom. Fund the next thing. Secure your family’s future.
Act 60 won’t make you money—you’re already doing that. What it will do is let you keep more of it. Same work. Same effort. Same risk. Thirty percent more reward.
Execution is everything. Get it right, and the incentives work in your favor. Get it wrong, and you’ll learn the hard way what the IRS already knows: policy may be generous, but compliance is merciless.
The real question isn’t “Can I afford to move to Puerto Rico?” It’s:
Can you afford not to?