Sale of Property Considerations
Overview
Selling property isn’t just a financial event, it’s a tax event. Whether you’re relocating to Puerto Rico, already a resident, or own property here or in the U.S., the sale of property brings federal and Puerto Rico tax considerations that can significantly impact your outcome.
This page outlines the key rules and implications for individuals navigating property sales within the broader framework of Puerto Rico residency, U.S. federal tax law, and Act 60 compliance.
Sale of Property in the U.S. After Moving to Puerto Rico
Puerto Rico residents are generally exempt from U.S. federal tax on Puerto Rico-sourced income, but not on U.S.-sourced gains. If you sell a U.S. property after moving:
U.S.-source capital gains remain subject to federal tax.
Puerto Rico will not tax U.S.-sourced capital gains.
No Act 60 exemption applies to U.S.-sourced sales, even after residency.
Capital gains from the sale of U.S. real estate are always considered U.S.-sourced.
Timing Matters: Built-In Gain and Allocation Rules
If your property appreciated before moving to Puerto Rico, only the post-move appreciation may qualify for local tax benefits. This is called a built-in gain allocation:
Pre-move gains are still taxable by the IRS.
Post-move gains may be exempt under Puerto Rico law, especially for long-term assets, if qualified under Act 60.
Proper documentation of acquisition date, basis, and appreciation period is essential to defend any allocation.
Sale of Property Located in Puerto Rico
For Puerto Rico-sourced property (real estate located on the island), the rules change:
Standard Puerto Rico long-term capital gains tax: 15%
If held less than 12 months: Ordinary income tax rates apply
Act 60 Exemption: If eligible and properly structured, post-residency gains from the sale of property in Puerto Rico may be 100% exempt
Note: The Act 60 exemption only applies to capital assets held for investment, not dealer property or inventory sales.
Common Mistakes to Avoid
Many taxpayers relocating to Puerto Rico make critical errors in how they approach the sale of property:
Selling too soon after moving, without meeting holding requirements
Misreporting source of income (e.g., treating U.S. sales as exempt)
Failing to file Form 8898 to establish residency
Overlooking how property use (rental vs. investment vs. personal) affects taxability
Proper planning and documentation can prevent audit exposure or missed savings.
Need Help Navigating Property Sales?
We help clients structure property sales, both in Puerto Rico and the mainland, for optimal tax outcomes. Whether you’re selling real estate, a business, or other capital assets, we provide clarity and strategy through every stage of the transaction.