Puerto Rico is known for its low real-estate taxes, making it a great choice for vacation properties or investment properties. What is more, the country is an unincorporated territory of the United States, making it easier for U.S. residents to purchase property. But remember that Puerto Rico is still a unique nation, separate from the United States, so it has its own laws that residents and nonresidents must follow when purchasing property. Buying or selling real estate in Puerto Rico requires an understanding of the tax laws that apply to all property in the nation.
Property taxes in Puerto Rico fall under the jurisdiction of CRIM: Centro de Recaudacion de Ingresos Municipales. This organization is a nine-member board that manages taxation in the municipal areas throughout Puerto Rico, with offices in each region.
Property owners or those who have recently purchased property must contact the local or regional office to find their tax rate and the amount of their property taxes. CRIM has made a number of changes in recent years that apply to property taxes, so new property owners should contact the office to ensure they understand their tax responsibilities.
Puerto Rico levies property taxes based on a flat rate of 1.03 percent for real estate. There is a further tax rate of 1 percent for the personal property contained within the real estate, falling under the furniture tax law of Puerto Rico, and an additional rate of 3 percent for the land containing the real estate. Property owners must consider not only the residence, but also the property attached to it and contained within it.
Law 83 and Law 71
Application of real estate tax laws has created some confusion in recent years, requiring a revised law that clarifies owner tax obligations. According to Law 83, enacted in 1991, property owners could be exonerated for unpaid property taxes up to $15,000, as long as the property represented the owner’s primary residence. Owners of multiple properties do not have this luxury. Due to this exoneration, many property owners were confused about whether or not they owed taxes, in part because property value reassessments were not always annual. CRIM could reassess at a later time and require back payment of taxes.
Many property owners did not realize the amount due, because they were unaware of the property value increase until they were beyond the $15,000 exoneration. As a result, the exoneration amount was raised to $150,000 in 2009 under Law 71, giving property owners more time to find the amount of their tax payments. No matter the laws, all property owners should be sure to contact CRIM to make sure they understand what taxes they owe in real estate.
- Global Property Guide: Puerto Rico Costs and Taxes
- U.S. Census Bureau. "Local Governments in Northeast More Reliant on Property Taxes than South and West." Accessed Nov. 26, 2019.
- Organisation for Economic Co-operation and Development. "Tax on Property." Accessed Nov. 26, 2019.
- Internal Revenue Service. "1.14.4 Personal Property Management." Accessed Nov. 26, 2019.
- Tax Foundation. "States Should Continue to Reform Taxes on Tangible Personal Property." Accessed Dec. 18, 2019.
- Tax Foundation. "Testimony before the House Ways and Means Select Revenue Measures Subcommittee." Accessed Dec. 18, 2019.
- Internal Revenue Service. "With New SALT Limit, IRS Explains Tax Treatment of State and Local Tax Refunds." Accessed Dec. 18, 2019.
Kristie Lorette started writing professionally in 1996. She earned her Bachelor of Science degree in marketing and multinational business from Florida State University and a Master of Business Administration from Nova Southeastern University. Her work has appeared online at Bill Savings, Money Smart Life and Mortgage Loan.