How is my IRA taxed if I move to Puerto Rico?

Internal Revenue Code is generally equivalent to the treatment of Roth IRAs under the US IRC. Contributions to a P.R. Non-Deductible IRA are not tax-deductible, but distributions are tax-free. A 10% early withdrawal penalty may apply if the distribution of the proceeds by the P.R.

Does Puerto Rico tax IRA distributions?

The Customer may request that the Bank distribute the funds from his/her IRA (either the Deductible or the Non-Deductible IRA) at any time, subject to the provisions of the Code. The funds deposited in a Deductible IRA are subject to income taxes in Puerto Rico when distributed or when deemed distributed.

Can Puerto Ricans have an IRA?

Puerto Rico has its own IRA system, with both traditional and Roth plans, but it is distinct from the US IRA system. Income from employment in Puerto Rico cannot contribute to a US IRA and vice versa. For a resident of Puerto Rico, a distribution from a US Roth IRA would be taxable by the Puerto Rican government.

What happens to your IRA if you move out of the country?

If you live abroad as a U.S. citizen, you are still required to file an annual income tax return, and taxes imposed on your IRA distributions will be the same as though you were living in the U.S. That is, distributions from a traditional IRA taken after you reach age 59 1/2 will be taxed as ordinary income, and …

Can you move to Puerto Rico to avoid taxes?

Further, Resident Individuals must apply for and obtain a tax exemption decree under Act 60. To obtain access to the approved and signed tax exemption decree, a one-time fee of $5,000 must be satisfied and deposited into a special fund to promote the relocation of Resident Individuals to Puerto Rico.

Does Puerto Rico tax my retirement income?

Retiring in Puerto Rico becomes an even more attractive option when you consider the generous tax policy known as the Individual Investors Act. Under this act, residents of Puerto Rico are exempt from paying island or federal income taxes on dividends, interest and capital gains.

Do Puerto Rican residents pay capital gains tax?

All capital gains and investment income of a Puerto Rican resident are taxable for Puerto Rican purposes.

How do US expats save for retirement?

The key to this for U.S. expats is you must have earned income to contribute to an IRA or Roth IRA. Without earned income, you cannot make a contribution to these accounts. The most common sources of earned income include wages from a job or net earnings from self-employment.

Can a non-US citizen have an IRA?

IRA participation rules A non-U.S. citizen legally working and living in the country can also open an IRA. There’s the option of a Roth or a traditional IRA. This can be your sole retirement account. Or you can open an IRA in addition to a 401(k).

Why is Puerto Rico a tax haven?

This is primarily due to the fact that US citizens who live in Puerto Rico (spending at least 183 days a year there) are not required to pay US federal tax on income and capital gains.

Is income earned in Puerto Rico taxable in the US?

Puerto Rico holds a unique position as an unincorporated U.S. territory. Under Internal Revenue Code (IRC) §933, Puerto Rico source income is excluded from U.S. federal tax.

How do I avoid taxes in Puerto Rico?

Are tax-deferred rollovers allowed between an IRA and a Puerto Rico?

As such, tax-deferred rollovers are not allowed between a U.S. IRA and a Puerto Rico IRA, or between a dual-qualified retirement plan and an IRA from either jurisdiction.

What is an eligible rollover distribution from a Puerto Rico qualified trust?

Under the P.R. Tax Code, an eligible rollover distribution from a Puerto Rico qualified trust is excluded from income if rolled over to an eligible retirement plan under the P.R. Tax Code, which generally includes only Puerto Rico plans and Puerto Rico IRAs.

Is there a Roth IRA in Puerto Rico?

The situation is the same with Social Security and other pension income. Puerto Rico has its own IRA system, with both traditional and Roth plans, but it is distinct from the US IRA system.

Can I withdraw money from my tax deferred accounts in Puerto Rico?

If you withdraw money from your tax deferred accounts while living in Puerto Rico, you have to pay Federal and Puerto Rico taxes. You do get a credit in Puerto Rico for taxes paid to the Federal Government and at the end you pay the highest of both, which may or may not be higher than what you pay in state and federal in a given US state.