U.S. Individual Tax
Overview
Navigating U.S. individual tax obligations can be complex, especially for those living in Puerto Rico, earning income in multiple jurisdictions, or transitioning residency. While bona fide residents of Puerto Rico may be exempt from U.S. income tax on Puerto Rico-source income, various situations still require federal compliance.
U.S. Individual Tax Filing Requirements
A U.S. citizen or resident alien must file a U.S. federal income tax return if they meet certain income thresholds. This includes:
Individuals earning income from U.S. or foreign sources while residing in Puerto Rico.
Puerto Rico residents with self-employment income (Form 1040-SS or Form 1040-PR).
Federal employees and members of the U.S. Armed Forces working in Puerto Rico.
U.S. citizens relocating to or from Puerto Rico (see Form 8898 filing requirements).
Income earned outside of Puerto Rico, such as U.S. dividends, pensions, or rental income, must generally be reported on Form 1040.
Dual Reporting Considerations
Some taxpayers may be required to file both Puerto Rico and U.S. tax returns depending on the source and type of income, and whether the individual qualifies for tax exemption under federal rules. Careful analysis is needed to avoid double taxation and ensure accurate allocation of income.
U.S. Individual Tax Key Forms
Form 1040 – Standard U.S. Individual Income Tax Return
Form 1040-SS / 1040-PR – For self-employed Puerto Rico residents
Form 1116 – Foreign Tax Credit (if applicable)
Form 8898 – Required when establishing or relinquishing Puerto Rico residency for tax purposes
Form 3520 / 3520-A – Reporting foreign trusts and gifts
Residency Transitions and Compliance
If you move to or from Puerto Rico and meet the $75,000+ income threshold, you may need to file Form 8898 to notify the IRS of your change in residency. Failure to file may result in significant penalties.
Similarly, understanding whether you maintain closer connections to the U.S. or Puerto Rico can impact your filing responsibilities. It’s important to document your status with supporting evidence, including the physical presence test, tax home, and closer connection tests.
Need support determining your U.S. filing obligations? We can help you assess exposure, prepare returns, and maintain compliance across both jurisdictions.
FAQ
If you’re a bona fide resident of Puerto Rico and all your income is from Puerto Rico sources, you generally do not need to file a U.S. federal income tax return. However, if you earn income from U.S. sources (such as investments, pensions, or remote work), you may be required to file Form 1040.
These forms are used by self-employed individuals residing in Puerto Rico to report income and pay self-employment tax. Filing is required even if you are exempt from regular federal income tax.
If you move to or from Puerto Rico and your gross worldwide income is $75,000 or more, you must file Form 8898 to notify the IRS of your change in residency status. Failing to file can lead to significant penalties.
Yes. U.S. citizens and Puerto Rico residents are subject to federal gift and estate tax regardless of residence. See our Gift & Estate section for more details.
Properly classifying income as Puerto Rico-source or U.S.-source is critical. In some cases, tax credits or treaty provisions may apply, but guidance from a qualified advisor is strongly recommended.
Need help meeting your U.S. Individual Tax filing obligations? Use the form below to describe your tax situation, and we’ll help you determine what applies.