Puerto Rico Residency Requirements: The Complete Checklist for Act 60

Qualifying as a bona fide resident of Puerto Rico is the gateway to Act 60's incredible tax benefits. But the IRS takes residency determinations seriously—and getting it wrong can mean losing your tax benefits AND facing penalties.

This guide covers exactly what you need to do to establish and maintain Puerto Rico residency for tax purposes.

The Three Tests for Bona Fide Residency

To be a bona fide resident of Puerto Rico, you must pass all three of these tests:

1. The Presence Test (183+ Days)

You must be physically present in Puerto Rico for at least 183 days during the tax year. Key rules:

• Count partial days as PR days if you sleep in PR that night
• Travel days can count toward your 183 if departing from/returning to PR
• Days in transit through the mainland US don't count against you

📅 Pro Tip: Track your days meticulously from day one. Use a calendar app, spreadsheet, or dedicated tracking tool. You'll need this documentation if audited.

2. The Tax Home Test

Your tax home—your regular place of business—must be in Puerto Rico. For employees, this is where your employer's office is located. For self-employed individuals:

• Your primary business must operate from PR
• Most of your business activities should occur in PR
• You should have a dedicated office or workspace in PR

3. The Closer Connection Test

This is the most subjective and most scrutinized test. You must demonstrate that your strongest ties are to Puerto Rico, not any US state.

Closer Connection Factors in Detail

The IRS examines numerous factors to determine where your "closer connection" lies:

Factor	What You Need	Priority
Permanent home	Own or rent primary residence in PR	Critical
Family location	Spouse/dependents should live in PR	High
Driver's license	Get PR driver's license	High
Voter registration	Register to vote in PR	High
Bank accounts	Open primary accounts in PR	Medium
Vehicles	Register car in PR	Medium
Personal belongings	Move furniture, valuables to PR	Medium
Professional licenses	Transfer or obtain in PR	Medium
Social organizations	Join clubs, churches, groups in PR	Low
Doctor/dentist	Establish relationships in PR	Low

The Residency Timeline

Before You Move

1. Research neighborhoods in PR (San Juan, Dorado, Condado popular for Act 60 folks)
2. Find housing (rental first is often wise)
3. Apply for Act 60 decree (can do before moving)
4. Plan your transition from current state

Month 1-3 in Puerto Rico

1. Establish physical presence
2. Apply for PR driver's license
3. Open bank accounts
4. Register vehicle
5. Join local organizations

Year 1 Requirements

• Complete 183+ days of presence
• File Form 8898 (Statement for Individuals Who Begin or End Bona Fide Residence)
• File PR tax return
• Make required $10,000 charitable donation
• Begin real estate search (2 year deadline)

Common Residency Mistakes

1. The "Mailbox" Move

Renting an apartment you rarely visit while spending most time in the mainland. This WILL fail an IRS audit.

2. Keeping a US Home

Maintaining a house in a US state suggests that's your real home. Sell or rent it out.

3. Family Separation

If your spouse and children remain in a US state, your closer connection may be to that state.

4. Poor Documentation

Without records, you can't prove your presence. Keep receipts, calendar entries, and photos.

⚠️ IRS Audit Warning: The IRS specifically targets Act 60 claims. They WILL examine your residency. Prepare as if you'll be audited—because you very well might be.

Maintaining Residency Year Over Year

Establishing residency is just the beginning. You must maintain it every year:

• Meet 183-day presence test annually
• Keep tax home in PR
• File annual Act 60 reports
• Pay annual compliance fees
• Make required charitable donations
• Maintain documentation of your PR life

What About Traveling?

You can travel extensively and still maintain PR residency, as long as you:

• Spend 183+ days in PR annually
• Don't establish ties to another jurisdiction
• Return to PR as your home base
• Maintain your PR residence while traveling

📊 Track Your Days: Whether you choose FEIE or Puerto Rico, tracking your physical presence is essential. Use our day-tracking tools to ensure you meet residency requirements.