Puerto Rico Real Estate, Tax Breaks, Pros and Cons

Puerto Rico Real Estate, Tax Breaks, Pros and Cons

Moving to Puerto Rico comes with some great benefits.
Maridav/Getty Images

  • Americans are moving to Puerto Rico for the climate, adventure and lower taxes.
  • People also have to consider other aspects, such as schools, which are trying to meet the demand.
  • Even things like finding new furniture can be challenging on the small island.

Puerto Rico is becoming an increasingly popular destination for Americans looking to relocate for tax purposes.

While the island boasts promises of adventure and financial incentives designed to attract investors and entrepreneurs, the move comes with challenges. Newcomers to Puerto Rico told Business Insider they would struggle to navigate the complexities of health care, education and even shopping. ITEMS such as furniture.

“I don’t sugarcoat it; it’s not for everybody,” Ricky said Santana, founder and managing partner of Colectivo Group, a Puerto Rico real estate firm that helps Americans move to the island. “You have to understand that you’re moving to a small island in the Caribbean where it’s still good, but there are going to be some compromises.”

From 2021 to 2022, about 27,000 people moved to Puerto Rico from US states, according to data compiled by the US Census Bureau. Tax incentive of the territory, Act 60it’s a big draw for many.

Any continent can move to Puerto Rico. But if they get a residence permit, they can apply for a 15-year decree under Law 60. If approved, the person or business only has to pay a flat rate of 4% on income and can get a 75% reduction in taxes of the property.

In addition, people do not have to pay any tax on accumulated capital gains after becoming resident and businesses benefit from a 50% reduction in council license taxes.

These benefits have opponents and can be a hot political topic at the local level. According to Santana, politicians must find ways to appease local Puerto Ricans who are upset that they are not getting the same tax breaks, while quietly acknowledging that the incentives are working to boost the island’s economy.

The economic impact is real, but come prepared

The shopping and nightlife in San Juan has been compared to that of Miami.
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A big consideration before moving to Puerto Rico is making sure the whole family is on board and will have what they need, Santana said.

“If your family, if your spouse, can’t adjust to Puerto Rico, it doesn’t matter how much tax you’re saving, it’s not going to work,” Santana said.

One of the biggest challenges for families with young children is finding the right school, Santana said. He added that there were some well-regarded bilingual schools on the island, but that they were struggling to cope with the growing population, especially in areas considered more desirable for mainlanders moving to the island.

One of those areas is Dorado, a town about 20 miles west of San Juan on the north side of the island, where many of the more expensive homes are being built. While a family may find the home and community they want in the area, if there is no local school availability, children may be forced to travel 35 to 40 minutes each way to a school in San Juan.

A map of Puerto Rico.
Getty Images

Other challenges include health care and services

Another big issue that people should consider before moving to Puerto Rico is the state of the health care system.

Sarah Lindsey and Sean Flynn, a semi-retired couple who moved to Humacao from Austin in 2021, previously told BI that health care insurance was cheap, but that “you’re getting what you paid for.”

Health care can be especially problematic, Santana said, if you need a specialist on the island. If you can find it, there can be a long wait, and other times, you may have to fly to Miami or New York for the necessary care.

Ricky Santana, founder and managing partner of Colectivo Group, a firm that helps mainlanders move to Puerto Rico.
Colectivo group

Puerto Rico was already in a “the health care crisis” in 2015, and the situation worsened over the next three years. In the year after Hurricane Maria in 2017, about 15% of Puerto Rico’s health care professionals left the island Vox reported, citing data from the College of Physicians and Surgeons of Puerto Rico.

Lindsey said if someone expressed interest in moving to Puerto Rico, she would first ask them about their health.

“Maybe you want to go there, but if you have some health issues, maybe not,” Lindsey said. “It’s really better for people who are younger and healthier.”

Local and federal governments are working on it improve health careand Lindsey and Flynn said a specific effort is being made to add clinics that can better care for older people.

If you are young and adventurous, Puerto Rico may be the perfect fit.
Kimberly Sue Walker/Getty Images

Santana also tells customers about the need for patience on the island, especially with services.

“You have to understand that in Puerto Rico it’s going to be a little quiet,” he said.

The lure of tax relief has sent real estate prices soaring

Since Puerto Rico is a US territory, mainland US residents can buy real estate on the island without any restrictions. The influx of continental Americans has affected the island’s high-end real estate market.

Five years ago, developers focused on building homes ranging from $2 million to $4 million, Santana said. Now developers are creating homes that cost between $20 million and $40 million, he added.

“It’s so surprising that the type of individuals that move on the island, we didn’t necessarily have that particular inventory available.” he said. “So developers have changed to adapt to the new requirements.”

A $20 million house for sale in Dorado, Puerto Rico.
Colectivo Group Real Estate

Prices are more reasonable in some areas, like Flynn and Lindsey’s new home in Humacao, which is about 90 minutes from San Juan on the island’s southeast coast.

Regardless of where transplants are placed, they may have difficulty finding essentials such as chairs, beds, and couches.

Selling furnished homes to people who come to the island without their own furniture has grown in popularity, Santana said. Otherwise, buying furniture usually means shipping it from the US, adding to the cost and wait.

Lindsey and Flynn said it was often the same for smaller items, as Amazon shipments can take up to a month to arrive.

Santana suggests that anyone on the fence about a move spend more than a typical vacation there before making a final decision.

“Maybe stay over the summer, stay a month,” Santana said. “Make sure it’s the right fit.”

If you’ve moved to Puerto Rico for tax incentives and want to share your experiences, contact this reporter at [email protected].

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