Taxation in Puerto Rico

Taxation in Puerto Rico takes the form of both Federal and Commonwealth taxes. Puerto Rico has independent tax-levying authority by provisions of 48 U.S.C. § 734 of the United States code.

Though the Commonwealth government has its own tax laws, Puerto Ricans are also required to pay most US federal taxes, with the major exception being that most residents do not have to pay the federal personal income tax. In 2009, Puerto Rico paid $3.742 billion into the US Treasury. Residents of Puerto Rico pay into Social Security, and are thus eligible for Social Security benefits upon retirement. However, they are excluded from the Supplemental Security Income (SSI), and the island actually receives a smaller fraction of the Medicaid funding than it would receive if it were a US state. Also, Medicare providers receive less-than-full state-like reimbursements for services rendered to beneficiaries in Puerto Rico, even though the latter paid fully into the system.

The federal taxes paid by Puerto Rico residents include import/export taxes, Federal commodity taxes, social security taxes, among others. Residents also pay federal payroll taxes, such as Social Security and Medicare taxes.

Only certain residents of Puerto Rico are required to file federal income tax forms. According to the Internal Revenue Service:

In general, United States citizens and resident aliens who are bona fide residents of Puerto Rico during the entire tax year, which for most individuals is January 1 to December 31, are only required to file a U.S. federal income tax return if they have income sources outside of Puerto Rico or if they are employees of the U.S. government. Bona fide residents of Puerto Rico generally do not report income received from sources within Puerto Rico on their U.S. income tax return. However, they should report all income received from sources outside Puerto Rico on their U.S. income tax return. Residents of Puerto Rico who are employed by the government of the United States or who are members of the armed forces of the United States also should report all income received for their services to the government of the United States on their U. S. income tax return.

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Wikipedia