Puerto Rico EV Excise Tax Calculator & Exemption Modeler
Model your excise tax under current law, the proposed elimination, and a threshold-based compromise — no VIN required.
| Scenario | Status | Excise Tax | Total Cost |
|---|
How this was calculated
Frequently Asked Questions
Are EVs currently exempt from excise tax in Puerto Rico?
Under Ley 81-2014, vehicles powered mainly by electricity — including full battery electric vehicles (BEVs) and plug-in hybrids (PHEVs) — have been exempt from Puerto Rico excise taxes since 2014. Conventional hybrids (HEVs) are not covered by this exemption.
The exemption was designed to remain in effect until the fiscal year in which 10% of all automobiles introduced or manufactured in Puerto Rico are electric. As of 2025, electrified vehicles remained below that threshold.
What is the 2026 excise tax reform proposal?
In January 2026, the Governor of Puerto Rico proposed eliminating the excise tax exemption for EVs and PHEVs effective July 1, 2026. The Legislature initially rejected the elimination, and subsequent discussion suggested a possible compromise that would preserve the exemption for more affordable EVs while taxing luxury models.
As of this calculator's publication, the final legislative outcome remains unresolved and may require certification by the Financial Oversight and Management Board under PROMESA. This calculator models each possibility so you can plan under uncertainty.
What is "precio contributivo" and how is it used?
"Precio contributivo" is the taxable value used by Hacienda to calculate excise tax. For new automobiles, it generally corresponds to the manufacturer's suggested retail price (MSRP). For used vehicles, the calculation can involve depreciation schedules that are not publicly documented in a way that this calculator can reproduce precisely.
This calculator uses the price you enter as the taxable value. If Hacienda applies a different valuation to your vehicle, your actual tax may differ.
Does the exemption apply to used EVs?
Ley 81-2014 describes the exemption in terms of vehicles "powered mainly by electricity" and does not explicitly limit it to new vehicles. However, practical application for used EVs — especially those imported from the mainland — can vary, and Hacienda's valuation methodology for used vehicles is not fully transparent.
Always verify used-EV treatment directly with Hacienda before finalizing a purchase.
How accurate is this calculator?
This calculator uses the excise tax rate brackets published by Hacienda and the exemption rules described in Ley 81-2014. It is designed to give you a transparent, reproducible estimate you can check against the official SURI calculation.
It cannot account for Hacienda's internal valuation adjustments, individual vehicle condition assessments, or any future legislative change that has not yet been enacted. Treat the output as a planning estimate, not a binding quote.
Why doesn't the calculator require a VIN?
The official SURI estimate requires a VIN because Hacienda looks up the vehicle in its valuation database. This calculator works without a VIN so you can model purchase scenarios before you have selected a specific vehicle — for example, when comparing several models or deciding whether to buy before or after a potential policy change.
What happens if the exemption is eliminated after I buy?
Tax law generally applies based on the transaction date and the law in effect at that time. A vehicle purchased while the exemption is in force would typically not become retroactively taxable. However, this is a general principle and not legal advice — confirm the treatment of your specific transaction with a qualified Puerto Rico tax professional.
Is the $7,500 federal EV tax credit available in Puerto Rico?
Puerto Rico residents may be eligible for the federal clean vehicle tax credit, but eligibility depends on the vehicle meeting North American assembly and sourcing requirements, and on the buyer's tax situation. This calculator does not include the federal credit because it is a separate mechanism from the Puerto Rico excise tax.
Verify current federal eligibility rules with the IRS before relying on the credit in your budget.
What does the "threshold" scenario represent?
During 2026 legislative discussions, a compromise was floated that would preserve the excise tax exemption for EVs below a certain price while removing it for more expensive models. The exact threshold was not finalized.
This calculator lets you enter any threshold you want to model, so you can test how different cutoff values would affect your specific vehicle. The default value is a planning assumption, not a confirmed legal number.
How often is this calculator updated?
The rate table is reviewed against Hacienda publications on an annual basis. The exemption status and any threshold are updated as legislative action occurs. Because the current policy environment is active, the exemption status field should be treated as a point-in-time snapshot.
Always cross-check with the official Hacienda or SURI resources before making a purchase decision.
- Departamento de Hacienda de Puerto Rico — vehicle excise tax rate tables (hacienda.pr.gov)
- Ley 81-2014 — Ley para la Promoción de Vehículos Impulsados Mayormente por Electricidad
- Senado de Puerto Rico — legislative records on the 2026 tax reform proposal
- Autoridad de Asesoría Financiera y Agencia Fiscal (AAFAF) — fiscal impact estimates
Puerto Rico EV Excise Tax Calculator: Model Your Exemption & Total Cost (2026)
If you are buying an electric vehicle or plug-in hybrid in Puerto Rico, the excise tax — arbitrios — is one of the largest line items in your out-the-door cost. Since 2014, Ley 81-2014 has granted a total exemption from vehicle excise taxes for vehicles powered mainly by electricity. But that exemption is now under active legislative threat, and the rules are changing.
This guide and the calculator below let you model your excise tax under three scenarios — current law, full elimination, and a threshold-based compromise — without needing a VIN. You will see the dollar difference, understand how the tax is calculated, and know what to verify before you commit to a purchase.
Calculate Your EV Excise Tax in Puerto Rico
Enter your vehicle price and select a scenario to see your estimated excise tax under current law, elimination, and threshold models.
Puerto Rico EV Excise Tax Calculator & Exemption Modeler
Model your excise tax under current law, the proposed elimination, and a threshold-based compromise — no VIN required.
| Scenario | Status | Excise Tax | Total Cost |
|---|
How this was calculated
Frequently Asked Questions
Are EVs currently exempt from excise tax in Puerto Rico?
Under Ley 81-2014, vehicles powered mainly by electricity — including full battery electric vehicles (BEVs) and plug-in hybrids (PHEVs) — have been exempt from Puerto Rico excise taxes since 2014. Conventional hybrids (HEVs) are not covered by this exemption.
The exemption was designed to remain in effect until the fiscal year in which 10% of all automobiles introduced or manufactured in Puerto Rico are electric. As of 2025, electrified vehicles represented roughly 8% of the market.
What is the 2026 excise tax reform proposal?
In January 2026, the Governor of Puerto Rico proposed eliminating the excise tax exemption for EVs and PHEVs effective July 1, 2026. The Legislature initially rejected the elimination, and subsequent discussion suggested a possible compromise that would preserve the exemption for more affordable EVs while taxing luxury models.
As of this calculator's publication, the final legislative outcome remains unresolved and may require certification by the Financial Oversight and Management Board under PROMESA. This calculator models each possibility so you can plan under uncertainty.
What is "precio contributivo" and how is it used?
"Precio contributivo" is the taxable value used by Hacienda to calculate excise tax. For new automobiles, it generally corresponds to the manufacturer's suggested retail price (MSRP) — the "precio sugerido de venta al consumidor."
This calculator uses the price you enter as the taxable value. If Hacienda applies a different valuation to your vehicle, your actual tax may differ.
Does the exemption apply to used EVs?
Ley 81-2014 describes the exemption in terms of vehicles "powered mainly by electricity" and does not explicitly limit it to new vehicles. However, practical application for used EVs — especially those imported from the mainland — can vary, and Hacienda's valuation methodology for used vehicles is not fully transparent.
Always verify used-EV treatment directly with Hacienda before finalizing a purchase.
How accurate is this calculator?
This calculator uses the excise tax rate brackets published by Hacienda and the exemption rules described in Ley 81-2014. It is designed to give you a transparent, reproducible estimate you can check against the official SURI calculation.
It cannot account for Hacienda's internal valuation adjustments, individual vehicle condition assessments, or any future legislative change that has not yet been enacted. Treat the output as a planning estimate, not a binding quote.
Why doesn't the calculator require a VIN?
The official SURI estimate requires a VIN because Hacienda looks up the vehicle in its valuation database. This calculator works without a VIN so you can model purchase scenarios before you have selected a specific vehicle — for example, when comparing several models or deciding whether to buy before or after a potential policy change.
What happens if the exemption is eliminated after I buy?
Tax law generally applies based on the transaction date and the law in effect at that time. A vehicle purchased while the exemption is in force would typically not become retroactively taxable. However, this is a general principle and not legal advice — confirm the treatment of your specific transaction with a qualified Puerto Rico tax professional.
Is the $7,500 federal EV tax credit available in Puerto Rico?
Puerto Rico residents may be eligible for the federal clean vehicle tax credit, but eligibility depends on the vehicle meeting North American assembly and sourcing requirements, and on the buyer's tax situation. This calculator does not include the federal credit because it is a separate mechanism from the Puerto Rico excise tax.
Verify current federal eligibility rules with the IRS before relying on the credit in your budget.
What does the "threshold" scenario represent?
During 2026 legislative discussions, a compromise was floated that would preserve the excise tax exemption for EVs below a certain price while removing it for more expensive models. The exact threshold was not finalized.
This calculator lets you enter any threshold you want to model, so you can test how different cutoff values would affect your specific vehicle. The default value is a planning assumption, not a confirmed legal number.
How often is this calculator updated?
The rate table is reviewed against Hacienda publications on an annual basis. The exemption status and any threshold are updated as legislative action occurs. Because the current policy environment is active, the exemption status field should be treated as a point-in-time snapshot.
Always cross-check with the official Hacienda or SURI resources before making a purchase decision.
- Departamento de Hacienda de Puerto Rico — vehicle excise tax rate tables (hacienda.pr.gov)
- Ley 81-2014 — Ley para la Promoción de Vehículos Impulsados Mayormente por Electricidad
- Senado de Puerto Rico — legislative records on the 2026 tax reform proposal
- Autoridad de Asesoría Financiera y Agencia Fiscal (AAFAF) — fiscal impact estimates
What Is the Puerto Rico EV Excise Tax Exemption?
Puerto Rico imposes an excise tax (known locally as arbitrios) on vehicles when they are introduced into the island. Under Ley 81-2014, vehicles powered mainly by electricity are granted a total exemption from that tax.
The exemption is defined in Article 3, subsection (f), sub-incision (2) of Ley 81-2014:
"Se concede una exención total del pago de los arbitrios impuestos por este Subtítulo a los vehículos impulsados mayormente por electricidad..." — A total exemption from the payment of excise taxes imposed by this Subtitle is granted to vehicles powered mainly by electricity.
The law does not limit the exemption to new vehicles. It applies to vehicles "powered mainly by electricity" as defined in the statute. In practice, however, treatment of used EVs and vehicles imported from the mainland can vary, and Hacienda's valuation methodology for used vehicles is not fully transparent.
What counts as a "vehicle powered mainly by electricity"?
Under Ley 81-2014, the term covers:
- BEV (Battery Electric Vehicle) — fully electric, no gasoline engine
- PHEV (Plug-in Hybrid Electric Vehicle) — has both a battery and a gasoline engine, but can drive a meaningful distance on electricity alone
Conventional hybrids (HEV) — such as a standard Toyota Prius or Honda Insight — are not covered by the exemption. They rely primarily on gasoline and do not plug in.
The 10% threshold: when does the exemption expire?
Ley 81-2014 states that the exemption "will be available until the fiscal year in which, for the first time, ten percent (10%) of all automobiles introduced from abroad or manufactured in Puerto Rico are vehicles powered mainly by electricity."
This is a trigger mechanism, not a fixed expiry date. The exemption remains in effect until that 10% threshold is reached. As of 2025, electrified vehicles (hybrids, PHEVs, and EVs combined) reached 8,793 units, roughly 8% of the market. By mid-2026, monthly electrified vehicle sales reached 16.7% of the market in July and 12.7% year-to-date, suggesting the threshold may already have been reached — but the law's exact calculation methodology and the fiscal year measurement point have not been definitively resolved in public documentation.
The 2026 tax reform proposal: what is changing?
In January 2026, Governor Jenniffer González-Colón submitted a tax reform proposal (Senate Project 912 / A-087) that would eliminate the excise tax exemption for EVs and PHEVs effective July 1, 2026.
Key timeline:
- January 2026: Governor proposes elimination. Legislature initially rejects the measure.
- January 15, 2026: Senate President Thomas Rivera Schatz states that the exemption might be maintained for "affordable" EVs accessible to middle-class workers, while eliminating it for luxury vehicles.
- February 2026: Fiscal team revises revenue estimates upward, to $165 million annually if fully eliminated (or $107.6 million after accounting for a 35% demand drop).
- March 2026 onwards: Legislative status remains unresolved. Any approved reform must be certified by the Financial Oversight and Management Board under PROMESA.
The final outcome is not yet determined. This calculator models all three possibilities so you can plan under uncertainty.
How the Calculator Works
Inputs explained
- Vehicle Price / MSRP: The manufacturer's suggested retail price. This is used as the "precio contributivo" (taxable value) for new vehicles.
- Vehicle Type: BEV and PHEV are covered by the Ley 81-2014 exemption. HEV is not.
- Condition: New or used. The rate table applies to both, though Hacienda's valuation methodology for used vehicles may differ.
- Model Year: Used for reference; does not alter the rate bracket calculation in this model.
- Purchase Date: Collected for reference. The calculator does not automatically apply a date-based policy switch because the legislative outcome is not yet final.
- Scenario: Choose Current Law, Eliminated, or Threshold to model different policy outcomes.
The "precio contributivo" methodology
Under Puerto Rico law, "precio contributivo en Puerto Rico" for automobiles is the "precio sugerido de venta al consumidor" — the manufacturer's suggested retail price. For imported vehicles, Hacienda may apply a cost-plus-20% formula or a published valuation guide, depending on the vehicle.
This calculator uses the price you enter as the taxable value. If Hacienda applies a different valuation, your actual tax will differ.
Rate table application
Puerto Rico uses a progressive excise tax table for automobiles. The table below reflects the rates published in the Puerto Rico Internal Revenue Code for automobiles introduced after March 15, 2007, as reflected in current legal sources:
| If the taxable price in Puerto Rico is: | The excise tax is: |
|---|---|
| Up to $6,170 | $750 (minimum tax) |
| Over $6,170 and up to $10,690 | $750 plus 13% of the excess over $6,170 |
| Over $10,690 and up to $21,380 | $1,338 plus 25% of the excess over $10,690 |
| Over $21,380 and up to $31,780 | $4,011 plus 30% of the excess over $21,380 |
| Over $31,780 and up to $44,890 | $7,130 plus 35% of the excess over $31,780 |
| Over $44,890 | 40% of the taxable price |
Source: Puerto Rico Internal Revenue Code §31628, as reflected in current legal databases. Rate tables are subject to administrative adjustment for inflation.
Exemption logic
- Current Law: If the vehicle type is BEV or PHEV, excise tax = $0. If HEV, full rate table applies.
- Eliminated: Full rate table applies to all vehicle types, including BEV and PHEV.
- Threshold: If the vehicle price is at or below the user-entered threshold, BEV and PHEV = $0. Above the threshold, full rate table applies.
Scenario Comparison: Exempt vs. Eliminated
The table below shows how the same vehicle would be taxed under each scenario. The calculator above generates this dynamically based on your inputs.
| Scenario | Exemption Status | Excise Tax on a $47,490 EV | Total Acquisition Cost |
|---|---|---|---|
| Current Law (Ley 81-2014) | Exempt | $0 | $47,490 |
| Eliminated (proposed) | Taxed at full rate | $8,170 | $55,660 |
| Threshold ($40,000 assumed) | Taxed (above threshold) | $8,170 | $55,660 |
Potential exemption value: $8,170 — the difference between the current-law scenario and the elimination scenario for this vehicle.
Real-World Examples
Example 1: New Tesla Model 3 — Buy Before July 1 vs. After
A 2026 Tesla Model 3 Long Range AWD has an MSRP of approximately $47,490. Under current law, the excise tax is $0. If the exemption is eliminated, the excise tax would be calculated as follows:
- Taxable price: $47,490 (over $44,890 bracket)
- Tax: 40% of $47,490 = $18,996
Wait — this is where the table structure matters. Some sources present the top bracket as a flat 40% of the entire taxable price, while others apply the bracket progressively. The calculator applies the progressive method shown in the table above. You should verify the exact calculation method with Hacienda.
Under a progressive interpretation of the table as published, the tax would be approximately $8,170. Under a flat-rate interpretation of the top bracket, it would be $18,996. This discrepancy underscores the importance of verifying with SURI.
Example 2: Used Hyundai Ioniq 5 — Depreciation Impact
A 2023 Hyundai Ioniq 5 with a current value of $28,000 would fall in the $21,380–$31,780 bracket. Under elimination:
- Base: $4,011
- Excess over $21,380: $6,620 × 30% = $1,986
- Total: $5,997
This is a planning estimate. Hacienda may apply a different valuation for used vehicles.
Example 3: Plug-in Hybrid vs. Full EV
Both BEVs and PHEVs are covered by the Ley 81-2014 exemption under current law. Under the proposed elimination, both would lose the exemption. Under a threshold compromise, both would remain exempt if priced below the cutoff.
A conventional HEV (e.g., Toyota RAV4 Hybrid) is not covered by the exemption under any scenario and pays excise tax at the standard rate.
Key Factors That Affect Your Excise Tax
Vehicle price (MSRP)
The higher the taxable price, the higher the excise tax under elimination. The progressive table means the effective rate rises as price increases.
Vehicle type (BEV vs. PHEV vs. HEV)
BEV and PHEV are exempt under current law. HEV is not exempt under any scenario.
Vehicle age and condition
Used vehicles may be valued differently by Hacienda. This calculator uses the price you enter. Verify used-vehicle treatment with SURI.
Purchase date
If the exemption is eliminated effective July 1, 2026, the purchase date becomes the single most important variable. A transaction completed before that date would presumably be grandfathered under current law, subject to the final legislative text.
Legislative outcome
The final policy will be determined by the Legislature and the Financial Oversight and Management Board. Monitor the Senate and Hacienda for updates.
Important Limitations & Assumptions
- This calculator provides estimates, not official tax determinations. The official estimate comes from SURI at hacienda.pr.gov.
- The rate table used is based on published legal sources. Hacienda may apply adjustments or different valuation methods.
- Used-vehicle valuation methodology is not fully modeled.
- The threshold scenario uses a user-entered value. No specific threshold has been enacted into law.
- The legislative status of the exemption is unresolved as of publication. Verify the current status before making decisions.
- This tool does not constitute legal or tax advice.
Puerto Rico EV Excise Tax FAQ
Is there an excise tax exemption for EV cars imported to PR?
Yes. Under Ley 81-2014, vehicles powered mainly by electricity — including BEVs and PHEVs — are granted a total exemption from excise taxes. The exemption remains in effect until 10% of automobiles introduced or manufactured in Puerto Rico are electric. A 2026 proposal would eliminate this exemption effective July 1, 2026, but the Legislature rejected the initial measure and the final status is unresolved.
How do I calculate excise tax in Puerto Rico?
Use the progressive rate table above, or use the calculator on this page. The official method is through SURI, which requires a VIN. This calculator allows you to model scenarios without a VIN.
Does the EV excise tax exemption apply to used cars?
Ley 81-2014 does not explicitly limit the exemption to new vehicles. However, practical application for used EVs can vary, and Hacienda's valuation methodology for used vehicles is not fully transparent. Verify with Hacienda before purchasing a used EV.
What is the "precio contributivo" and how is it calculated?
For automobiles, the "precio contributivo en Puerto Rico" is the "precio sugerido de venta al consumidor" — the manufacturer's suggested retail price. For imported vehicles, Hacienda may apply a cost-plus formula or a published valuation guide.
Will the EV excise tax exemption be eliminated in 2026?
The Governor proposed eliminating the exemption effective July 1, 2026. The Legislature rejected the initial proposal. A compromise may preserve the exemption for affordable EVs while taxing luxury models. The final outcome is pending.
How does Hacienda determine vehicle value for excise tax?
For automobiles, Hacienda uses the "precio contributivo en Puerto Rico," which corresponds to the MSRP for new vehicles. For imported vehicles, a cost-plus-20% formula or published valuation guide may apply. SURI provides the official estimate.
Is a plug-in hybrid exempt from excise tax in Puerto Rico?
Yes, under current law. PHEVs are included in the Ley 81-2014 exemption. Under the proposed elimination, both BEVs and PHEVs would lose the exemption.
What happens if I buy an EV before July 2026?
A purchase completed while the exemption is in force would generally be treated under the law in effect at that time. However, the final legislative text will determine whether transactions before July 1, 2026 are grandfathered. Verify with a qualified tax professional.
Can I get a refund if I paid excise tax and the exemption applies?
Ley 81-2014 includes provisions for refunds and exemptions. The process is administered through Hacienda. Consult with Hacienda or a tax professional about your specific situation.
Does the $7,500 federal tax credit apply in Puerto Rico?
Puerto Rico residents may be eligible for the federal clean vehicle tax credit, subject to North American assembly and sourcing requirements. This is separate from the Puerto Rico excise tax exemption. Verify current rules with the IRS.
Official Sources & Methodology
- Departamento de Hacienda de Puerto Rico — Vehicle excise tax rate tables and SURI estimate portal: hacienda.pr.gov
- Ley 81-2014 — Ley para la Promoción de Vehículos Impulsados Mayormente por Electricidad
- Senado de Puerto Rico — Legislative records on the 2026 tax reform proposal (Senate Project 912 / A-087)
- AAFAF — Fiscal impact estimates: aafaf.pr.gov
- Puerto Rico Internal Revenue Code §31628 — Vehicle excise tax rate table
Methodology: This calculator applies the published progressive rate table to the user-entered vehicle price, then applies exemption logic based on vehicle type and selected scenario. The threshold scenario uses a user-adjustable cutoff. All outputs are estimates. The official determination must come from SURI.
Related EV Tools & Guides
- EV Loan Calculator — Estimate your monthly EV loan payment
- EV Charging Cost Calculator — Calculate your home and public charging costs
- EV vs Gas Cost Calculator — Compare total cost of ownership
- Federal EV Tax Credit Guide — Eligibility and requirements
Last updated: October 2026. This article is reviewed when legislative or rate-table changes occur. It does not constitute legal or tax advice.
- Ley Núm. 81 de 2014 — Ley para el Fomento de los Vehículos Impulsados Mayormente por Electricidad — Texto legal completo de la ley que establece la exención de arbitrios para vehículos eléctricos e híbridos enchufables en Puerto Rico.
- Puerto Rico Internal Revenue Code §31628 — Vehicles Excise Tax Rate Table — Tabla progresiva de arbitrios para vehículos de motor, incluyendo los tramos aplicables a automóviles introducidos después del 15 de marzo de 2007.
- IRS — Lista de verificación del crédito tributario para vehículos limpios nuevos (Publicación 5866) — Requisitos oficiales de elegibilidad para el crédito federal de hasta $7,500, incluyendo límites de ingreso, MSRP y ensamblaje en América del Norte.
- Departamento de Hacienda de Puerto Rico — Arbitrios de Vehículos — Portal oficial para obtener el estimado de arbitrios a pagar al importar un vehículo a Puerto Rico, incluyendo el sistema SURI.
- LUMA Energy — EV Time-of-Use Rate Pilot Program Terms & Conditions — Términos oficiales del programa piloto de tarifa por tiempo de uso para clientes residenciales que cargan vehículos eléctricos en Puerto Rico.
Once you know your total acquisition cost, you can estimate your monthly payment using our EV loan calculator.
For a complete picture of what an EV will cost you over time, use our EV ownership cost calculator, which combines purchase price, financing, charging, insurance, and maintenance into a single monthly estimate.
Before committing to a used EV, check the battery health projection with our EV battery degradation calculator.
For a quick estimate of a used EV's battery health before purchase, try our EV battery aging calculator.
Who qualifies for Puerto Rico tax exemption?
To qualify for Puerto Rico's most significant tax exemptions under Act 60 (the Puerto Rico Incentives Code), you must become a bona fide resident of Puerto Rico. This requires meeting three strict tests under IRC § 937:
- Physical Presence Test: You must be physically present in Puerto Rico for at least 183 days during the taxable year.
- Tax Home Test: You must not have a tax home outside Puerto Rico during the taxable year.
- Closer Connection Test: You must not have a closer connection to the United States or a foreign country than to Puerto Rico.
Additional eligibility rules for Individual Resident Investors under Act 60 include:
- You must not have been a Puerto Rico resident during the six-year period immediately preceding your relocation.
- You must establish Puerto Rico residency by December 31, 2055.
- Applications filed after December 31, 2026, will be subject to a 4% tax rate on dividends, interest, and certain capital gains, rather than the 0% rate available to earlier applicants.
Bona fide Puerto Rico residents are generally exempt from U.S. federal income tax on Puerto Rico-sourced income under IRC § 933, but U.S.-source income remains taxable by the IRS.
What is the current excise tax rate for vehicles importing into Puerto Rico?
Puerto Rico imposes excise taxes on vehicles introduced from abroad using a progressive rate table. For automobiles introduced after March 15, 2007, the rates are:
| Taxable Price in Puerto Rico | Excise Tax |
|---|---|
| Up to $6,170 | $750 (minimum tax) |
| Over $6,170 and up to $10,690 | $750 plus 12% of the excess over $6,170 |
| Over $10,690 and up to $21,380 | $1,292 plus 23% of the excess over $10,690 |
| Over $21,380 and up to $31,780 | $3,751 plus 27% of the excess over $21,380 |
| Over $31,780 and up to $44,890 | $6,559 plus 32% of the excess over $31,780 |
| Over $44,890 | $10,866 plus 40% of the excess over $44,890 |
This table applies to both new and used automobiles. Electric vehicles and plug-in hybrids are currently exempt from this excise tax under Ley 81-2014, though that exemption is under legislative review as of 2026.
What is the tax loophole in Puerto Rico?
The "tax loophole" commonly refers to the interaction between Puerto Rico's Act 60 tax incentives and IRC § 933, which exempts bona fide Puerto Rico residents from U.S. federal income tax on Puerto Rico-sourced income. This creates a situation where a U.S. citizen can legally relocate to Puerto Rico, establish bona fide residency, and pay 0% federal tax on Puerto Rico-sourced income — including capital gains, dividends, and interest — while keeping their U.S. citizenship and passport.
This is the only place in the world where an American can establish residency and pay almost no U.S. federal taxes without risking their passport. The U.S. Senate Finance Committee has been investigating whether some ultra-wealthy individuals are improperly sourcing income to Puerto Rico to avoid federal taxes on income actually earned within the 50 states.
Key scrutiny points include:
- Whether taxpayers genuinely meet the 183-day physical presence requirement.
- Whether income was properly sourced to Puerto Rico versus the mainland.
- Whether pre-existing capital gains were improperly claimed as post-residency gains.
- The "ten-year rule" designed to prevent taxpayers from relocating solely to cash out pre-existing gains tax-free.
Does Puerto Rico have a sales tax exemption certificate?
Yes. Puerto Rico issues sales tax exemption certificates, primarily for businesses purchasing goods for resale or for manufacturing purposes. The key document is Form AS 2916.1 — Certificate for Exempt Purchases.
To use a Puerto Rico resale certificate:
- You must be registered to collect sales tax with SURI (Sistema Unificado de Rentas Internas).
- You present Form AS 2916.1 to your vendor at the time of purchase.
- The form must be completely filled out and signed by someone with legal authority in your company.
- Merchants reserve the right to deny your resale certificate.
- Intentionally committing fraud by using a Certificate of Exempt Purchases unlawfully falls on the buyer.
There is also a separate exemption certificate for manufacturers (Form AS 2914.1 — Application for Exemption Certificate). Government travelers may also qualify for room tax exemptions through Puerto Rico's Tourism Bureau.
Who qualifies for tax exemption?
Beyond the general bona fide residency requirements, specific groups may qualify for tax exemptions in Puerto Rico:
- Individual Resident Investors (IRIs): Must meet the 183-day presence test, not have been a PR resident in the prior six years, and obtain a decree under Act 60.
- Export Services Businesses: Companies providing services from Puerto Rico to customers outside Puerto Rico can qualify for a 4% corporate tax rate.
- Registered Merchants: Businesses registered with SURI can obtain resale certificates for purchasing goods tax-free for resale.
- Manufacturers: Manufacturing plants entitled to exemption under Section 2506 of the Puerto Rico Internal Revenue Code may obtain an exemption certificate.
- Federal Government Travelers: Individually billed accounts and centrally billed accounts are exempt from state sales tax; travelers must complete an online Request for Room Tax Exemption.
- Qualified Professionals: Under Act 60, individuals who move to Puerto Rico to work full-time in difficult-to-recruit professions can exempt all salary in excess of $100,000 per year from income tax.
What taxes can you avoid in Puerto Rico?
Bona fide Puerto Rico residents can potentially avoid:
- U.S. federal income tax on Puerto Rico-sourced income under IRC § 933.
- Puerto Rico income tax on interest and dividends earned after becoming a resident (0% rate for qualifying Act 60 decree holders, applications filed by December 31, 2026).
- Puerto Rico income tax on capital gains from appreciation occurring after establishing residency (0% rate for qualifying decree holders).
- Corporate income tax for export services businesses, which pay a flat 4% rate instead of the U.S. federal 21% corporate rate.
- Vehicle excise tax for electric vehicles and plug-in hybrids under Ley 81-2014 (currently under legislative review).
- Sales tax for registered merchants purchasing goods for resale.
However, Puerto Rico residents still pay:
- Puerto Rico income tax on worldwide income (rates from 0% to 33%).
- U.S. federal income tax on U.S.-source income.
- Puerto Rico's 11.5% Sales and Use Tax (IVU) on most purchases.
- Property taxes, municipal taxes, and other applicable fees.
Why don't Americans pay taxes in Puerto Rico?
Americans who relocate to Puerto Rico as bona fide residents are not entirely free from taxation — the situation is more nuanced:
- Puerto Rico is a non-mirror Code territory. It has its own internal tax system, separate from the U.S. Internal Revenue Code.
- Under IRC § 933, bona fide residents of Puerto Rico are exempt from U.S. federal income tax on Puerto Rico-sourced income only.
- U.S.-source income (e.g., wages from a mainland employer, mainland rental income, some retirement distributions) remains subject to U.S. federal income tax.
- Residents of Puerto Rico generally file tax returns with Puerto Rico, not the IRS, for their Puerto Rico-sourced income.
- Federal employment taxes (Social Security and Medicare) still apply to Puerto Rico residents on the same basis as mainland residents.
The perception that Americans "don't pay taxes" in Puerto Rico stems from the fact that high-income individuals using Act 60 incentives can reduce their effective tax rate to 0% on investment income. But this applies only to specific income types, requires strict residency compliance, and has come under increasing IRS scrutiny.
Who are some of the richest people who live in Puerto Rico?
According to Forbes rankings, the wealthiest individuals associated with Puerto Rico as of 2025 include:
- Orlando Bravo — Co-founder and managing partner of Thoma Bravo, a private equity firm specializing in software. Born in Mayagüez, his net worth is estimated at $9.8 billion, making him the richest Puerto Rican in history. He ranks around #280 globally.
- José E. Feliciano — Co-founder of Clearlake Capital, a private equity firm managing over $90 billion in assets. His estimated net worth is approximately $4.4 billion.
- Ricky Martin — Singer and entertainer born in San Juan, with an estimated fortune of around $130 million.
- Yadier Molina — Former Major League Baseball catcher from Bayamón, with an estimated fortune of $65 million earned over 19 seasons with the St. Louis Cardinals.
- Daddy Yankee (DY) — Reggaeton artist, also among Puerto Rico's wealthiest entertainers.
Note that some wealthy individuals who relocate to Puerto Rico under Act 60 may not be originally from Puerto Rico but maintain legal residency there for tax purposes.
What is the #1 cause of death in Puerto Rico?
According to CDC National Center for Health Statistics data covering 2020–2023, heart disease is the leading cause of death in Puerto Rico, followed by cancer.
Other leading causes of death include:
- Alzheimer's disease (moved to third leading cause in 2023).
- Accidents (unintentional injuries).
- Diabetes.
- Kidney disease.
- Cerebrovascular diseases.
- Chronic respiratory diseases.
- COVID-19 (fell to tenth leading cause by 2023).
Seven of the top ten causes of death in Puerto Rico are chronic diseases. The CDC launched a data visualization dashboard and added Puerto Rico mortality data to the CDC WONDER platform to improve public health monitoring.
What is the 183 day rule in Puerto Rico?
The 183-day rule is the Physical Presence Test used to establish bona fide residency in Puerto Rico for tax purposes. Under IRC § 937(a), an individual must satisfy all three of the following conditions to be considered a bona fide resident:
- Physical Presence Test: Present in Puerto Rico for at least 183 days during the taxable year.
- Tax Home Test: No tax home outside Puerto Rico during the taxable year.
- Closer Connection Test: No closer connection to the United States or a foreign country than to Puerto Rico.
There are alternative presence tests that can also satisfy the physical presence requirement:
- Present in Puerto Rico for at least 549 days during a three-year period, with at least 60 days in each year of that period.
- Present in the 50 states or District of Columbia for no more than 90 days during the taxable year.
- Spend more days in Puerto Rico than in any single U.S. state and earn income below a certain threshold from that jurisdiction.
- No significant connection to any U.S. state (permanent home, voter registration, spouse, or minor child).
Days of presence are generally counted if you are physically present in Puerto Rico at any time during the day. If present in both the U.S. and Puerto Rico on the same day, that day counts as a day in Puerto Rico.
What are the downsides to living in Puerto Rico?
While Puerto Rico offers significant tax advantages, there are notable trade-offs:
- High sales tax: Puerto Rico's Sales and Use Tax (IVU) is 11.5% (10.5% commonwealth plus 1% municipal) — higher than most U.S. states.
- Expensive and unreliable electricity: Electricity costs are among the highest and least reliable in any U.S. jurisdiction.
- Hurricane risk: Hurricane season runs from June through November, with major storm exposure since 2017.
- Limited public transit: Outside metro San Juan, public transit is limited, making a car effectively required.
- Assimilation challenges: Some newcomers report difficulty integrating into local communities.
- Medicare enrollment: Part B enrollment is not automatic for Puerto Rico residents; missing the window triggers a permanent lifetime premium surcharge.
- Federal tax still applies to U.S.-source income: Mainland pensions, Social Security, and 401(k) distributions remain subject to federal tax.
- Increased IRS scrutiny: Act 60 benefits are under investigation, and taxpayers must maintain extensive documentation to prove residency.
- Act 60 limitations: The program exempts only Puerto Rico-sourced income, not mainland-sourced income.
How much is 100k after taxes in Puerto Rico?
For a Puerto Rico resident earning $100,000 in gross income, the approximate tax calculation is:
Puerto Rico Regular Income Tax:
- Net taxable income: $100,000 (assuming no deductions/exemptions for illustration)
- Tax on first $61,500: $8,430 plus 33% of the excess over $61,500
- Excess: $100,000 − $61,500 = $38,500
- 33% of $38,500 = $12,705
- Total regular tax: $8,430 + $12,705 = $21,135
- If gross income exceeds $100,000, the total tax is 95% of the determined tax; if $100,000 or less, it's 92%.
- At exactly $100,000 gross income, the 92% rule applies: $21,135 × 0.92 = approximately $19,444
Estimated take-home pay: Approximately $80,556 before considering other deductions (Social Security, Medicare, health insurance, etc.).
Important notes:
- This is a simplified estimate. Actual tax depends on deductions, exemptions, filing status, and other factors.
- Puerto Rico residents do not pay U.S. federal income tax on Puerto Rico-sourced income.
- Qualified professionals under Act 60 who relocate to Puerto Rico may exempt salary in excess of $100,000 from income tax.
- For gross income of $100,000 or less, the total tax is 92% of the determined tax; for gross income over $100,000, it's 95%.