Puerto Rico’s Act 60: The 0% Window Closes in December
For US citizens, Puerto Rico occupies a unique position: it is the only place on earth where an American can legally reduce federal tax on investment income to zero without renouncing citizenship. That arrangement, known as Act 60, was rewritten in March 2026, and the rewrite created a hard deadline. Applications filed by 31 December 2026 lock in the old terms. Applications filed later get a different, worse deal. If Puerto Rico was ever on your list, this is the year the list gets decided.
How the arrangement works
US tax law excludes Puerto Rico-source income of bona fide island residents from federal taxation. Act 60 completes the picture on the Puerto Rican side: qualifying resident investors pay 0 percent local tax on interest, dividends, and capital gains accrued after they establish residency, and export-service businesses pay a 4 percent corporate rate, dropping to 2 percent for the first five years for smaller operations. The combination produces something no state and no foreign country can offer a US person: near-zero taxation on investment returns with the blue passport untouched.
What changed in March 2026
Act 38-2026, signed on 10 March, extended the entire program through 2055, which is good news, and split applicants into two tracks, which is the deadline. Decrees applied for on or before 31 December 2026 keep the classic structure: 0 percent on qualifying passive income, generally through 2035. Applications from 1 January 2027 onward fall under a new regime: a flat 4 percent on capital gains, interest, and dividends, plus a requirement of six years of non-residence in Puerto Rico before applying. Existing decree holders are untouched. Four percent is still remarkable by any mainland standard, but zero is zero, and the difference over a decade of investment returns is measured in whole percentage points of a portfolio.
The traps that catch people
Three of them, all well documented. First, bona fide residency is a real test: presence on the island for the required days, a genuine home, and a closer connection to Puerto Rico than to any state. Second, the pre-move appreciation trap: gains that built up before you relocated remain federally taxable when realized; the 0 percent applies to appreciation after residency begins. Whoever moves with a large unrealized position needs a realization strategy, not just a plane ticket. Third, the decree is a contract with conditions, including an annual charitable contribution and a local property purchase within the required window. People who treat the decree as a formality tend to meet the auditors who exist because others did the same.
Who should act this year
Act 60 is built for US persons with substantial investment income or an exit on the horizon: founders approaching a liquidity event, active traders, holders of appreciated crypto positions planning future realizations. For them, a decree application before 31 December 2026 preserves the strongest version of the deal that will likely ever exist. Non-US persons generally have better instruments elsewhere, and anyone unwilling to genuinely live on the island should not start. The paperwork takes months, not days. Counting backward from December, the practical deadline is autumn.
Whether Puerto Rico fits your situation, and how a relocation sequences with realizations, entities, and the rest of your structure, deserves one thorough conversation soon rather than a rushed one in November. Book an initial consultation, or start with the framework in World Wide Wealth.