Gift and Estate Tax
Federal and Puerto Rico Tax Guidance for Property Transfers
Puerto Rico residents must carefully navigate both local and U.S. rules when it comes to gifting property or managing estates. While Puerto Rico does not impose a gift or inheritance tax, specific filing obligations still apply, particularly if U.S. assets are involved.
Gifts and Donations in Puerto Rico
Puerto Rico does not assess a gift tax. However, any donation or transfer of property over $10,000 must be reported on an informative return filed annually by January 31.
The report must include:
A description of the property
A good faith estimate of fair market value
The donor’s basis in the property transferred
No valuation is required, but the donor’s cost basis carries over to the recipient.
Inheritance and Estate Reporting in Puerto Rico
While there is no estate or inheritance tax in Puerto Rico, an informative return is required within 12 months of the decedent’s death. This return must include:
A detailed list of transferred property
Certification of no outstanding Puerto Rico taxes
CRIM certificate with the property ID number
Upon filing, the Puerto Rico Treasury will issue a Lien Cancellation Certificate, provided the estate is in good standing with both Treasury and CRIM.
Federal Estate Tax Rules for Puerto Rico Residents
Puerto Rico residents who own U.S. assets at the time of death are subject to limited U.S. estate tax rules:
A $60,000 U.S. Estate Tax exemption applies to nonresident aliens (including Puerto Rico residents under U.S. Code)
By contrast, U.S. residents receive a $13,990,000 exemption in 2025
Filing is required when the U.S. estate exceeds the exemption amount
Key Federal Forms
Form 706 – U.S. Estate Tax Return
File within 9 months of the date of death
Extension available using Form 4768
Portability elections must be filed within 2 years, even if no tax is due
Form 1041 – U.S. Income Tax Return for Estates and Trusts
Required for irrevocable trusts or estates with over $600 in gross income
Due by April 15 with Form 7004 available for a 5.5-month extension
Required if there is a nonresident alien beneficiary or Qualified Opportunity Fund investment
Use Form 1041-NR for foreign estates
Trusts and Tax Planning
For property held in a revocable trust, no federal tax return is required as long as it remains a grantor trust. Once the trust becomes irrevocable, the filing of Form 1041 is generally required.
Clients with dual U.S. and Puerto Rico property often utilize:
Trust structures for estate control and tax efficiency
Entity ownership to manage exposure and maintain compliance
Cross-jurisdiction planning for U.S. gift and estate tax thresholds
Whether you are gifting assets, managing an estate, or planning for the future, we help Puerto Rico residents comply with both local and federal filing obligations, and plan accordingly.