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jgordosea, Enrolled Agent
Category: Tax
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Experience:  I've prepared all types of taxes since 1987.
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Puerto Rico -- Retirement/Investments Plans

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Puerto Rico -- Retirement/Investments Plans Hi. I'm wondering about taxes I will eventually face when I reach the distribution age on my employer's dual qualified retirement plan (I am transferring to P.R. beginning in 2014)... Will I be subject to taxes both in the U.S. and P.R.? Also, I currently have an IRA in the U.S. What tax liabilities will I face with this instrument in the future (since I will be a resident of P.R.)? Lastly, while in P.R., will I be able to contribute to my U.S. IRA, or will I need to have a P.R. equivalent for myself and wife? Thank you for your expertise!



Perhaps it is useful to think of the Puerto Rica income tax as being similar to a state income tax as the US federal tax and the Puerto Rica tax are two separate systems and have different rules as to what will be taxed.

You will be subject to both Puerto Rico and US taxes just as residents of most states are subject to state and US income taxes.


For Puerto Rico tax return a bona fide resident of Puerto Rico, generally, reports your worldwide income excluding your US income (as that is not subject to Puerto Rico tax).

So, that Puerto Rican return will not include your IRA distributions but would include your wages from Puerto Rico.

Note that in April of 2013 the territory eliminated its taxes on interest and dividend income (that was 33 percent), and also cut the capital gains tax rate to zero. That might want to be considered as you decide to contribute to an IRA.


As a U.S. citizen or a resident alien, in addition to filing a Puerto Rico tax return, you will file a U.S. tax return reporting your worldwide income with the exception of Puerto Rico income. So, the US return would include your IRA distributions but would not include your wages from Puerto Rico.

More information is available at


Note that someone with only Puerto Rico income will not usually be required to file a US tax return since Puerto Rico income is not part of the US income. If you are a bona fide resident of Puerto Rico and qualify to exclude your Puerto Rican source income on your U.S. tax return, you determine your adjusted filing requirement based on the filing thresholds. See


There are special rules for government workers and those in the armed services.



There are separate IRA and pension plans for US and Puerto Rico so it is not usually possible to contribute to the US IRA based on the Puerto Rico wages.

There are some plans like that mentioned for your employer that qualify under both set of rules.


Please ask if you need more information.

Thank you.




Customer: replied 4 years ago.

Good info...just need a couple of items clarified:


"There are separate IRA and pension plans for US and Puerto Rico so it is not usually possible to contribute to the US IRA based on the Puerto Rico wages."


1. Will the above mentioned apply to Roth IRA's held in the U.S. as well?

In other words, do both tax entities permit me to contribute after tax proceeds from P.R. into a U.S. held Roth IRA? (Remember, I would be a resident in P.R.)


2. Since I would not be able to contribute to my traditional IRA in the U.S., would I also be permitted to open and contribute into an IRA in P.R.? My wife?


Thanks again!

Hello again,

For US traditional and Roth IRA you will not be able to take contributions based on your Puerto Rico earnings and would have to have earnings from within the US.
Remember that the Puerto Rico income will not be subject to US tax.

Puerto Rico tax rules do have Roth IRAs.
"Non Deductible Individual Retirement Accounts (Roth IRA) are
an investment instrument under which, contrary to regular IRA’s,
annual contributions to the same cannot be claimed as a deduction
on the income tax return for the particular taxable year."

IRA rules for contributions and spouses in Puerto Rico are similar to those in the US.
"In case of married taxpayers filing a joint return, including those
who choose the optional computation of tax (Schedule CO
Individual), each one may establish, individually, his/her own
IRA, or one of the spouses may establish an IRA for himself/
herself and another IRA in the name of the other spouse, without
considering if he/she receives income. The contribution cannot
exceed $10,000 or the aggregate adjusted gross income from
salaries and the earnings attributable to professions or business,
whichever is smaller. However, the deduction for each spouse
cannot exceed $5,000.
No deduction is allowed for the taxable year in which the
individual has reached 75 years of age or more at the end of
the taxable year. Also, no deduction will be allowed if the
income received during the year is from pensions or
The taxpayer will have until the due date established by the
Code to file the return, or until the due date of any extension of
time granted by the Secretary to file the return to make a
contribution to his/her IRA."


If you need clarification on these additional questions please continue to ask.
Thank you.

jgordosea and other Tax Specialists are ready to help you
Customer: replied 4 years ago.
Please see message received from Fidelity and advise.
Manuel Vazquez.

To: Manuel J Vazquez
Topic: Guidance with an investment decision
Subject: Current Roth IRA <>
Date: 08/18/2013 2:40 PM
Dear Mr. Vazquez:

Thank you for contacting us regarding contributing to your ROTH IRA. I am happy to help.

Because Puerto Rico is a United States territory, you may continue to contribute to your ROTH IRA while living there. There will be no restrictions placed on your account.

Thank you for choosing Fidelity for your investment needs. Have a nice day!


Danielle Klock
Fidelity Brokerage Services LLC, Member NYSE, SIPC

Hello again,


Indeed you can contribute without restriction (for being a foreign investor or other reason)


But, that is not saying that you can use the earnings in Puerto Rico to be eligible for a contribution. Similarly, Fidelity will accept a contribution from a US citizen that had zero earnings for the year; but that would be an excess contribution that the taxpayer would either pay the additional tax for an excess contribution or withdraw by the due date of the return.


In my experience, the fact that the trustee will accept a contribution does not in any manner determine if that contribution is allowed by the tax rules and regulations.


Hope this helps.


Customer: replied 4 years ago.
So in English.... :)
As a resident of Puerto Rico,
I will not be able to contribute to a simple IRA in the US, but a Roth is fine (and taxes will apply once funds are taken in distribution), whether or not the Roth is in the US or Puerto Rico.

Hello again,


In order to make a contribution to the Roth in the US you will need to have earned income in the US. You can do this whether or not you are resident in Puerto Rico if you have US source earnings.


The Puerto Rico earnings will only be able to be qualify for a contribution to the Puerto Rico IRA or retirement plan.


The United States earnings will only be able to be used to qualify for a contribution to the United States IRA or retirement plan.


There are some retirement plans that do qualify for either or both Puerto Rico and the US but unless this is new there is not any IRA that can qualify using either type of earnings.