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I have new client that has retirement from US job and social security, but has been living in Puerto Rico for the past couple of years. Has any one heard of a way to get a credit on US tax return because they are living in PR? Please and Thank you!
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Might they have to file the Puerto Rico version of the 1040 and not the regular 1040?
The more I know the more I don’t know.
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They don't have income in PR. What I found, that would omit them from having to file to claim worldwide income. Because its US generated (soc security and pension from US based company) I keep circling back to them having to file the US return. But don't see anything to give them any type of credit. And they have a home in PR, and a home here in there, but the daughter lives in it here and they don't charge her. Adding more complexity to it. And they had federal taxes taken out of pension - leading me back to regular 1040.
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What kind of credit are you looking for then?
The more I know the more I don’t know.
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I'm thinking its more of a tax break than a credit. They owe on federal and thought there may be a way to relieve some of the tax obligation because they actually been living in PR. Trying to see if anyone is aware of anything that I may be overlooking.
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You do know, of course, that Puerto Rico is part of the United States?
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Yes I do. They have different tax implications as they have an independent tax system.
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They do not have an independent tax system. They have a "mirror" system that allows them to collect some federal taxes that otherwise be paid to IRS -- but not from retirees.
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This is straight from Pub 570:
The Commonwealth
of Puerto Rico
The Commonwealth of Puerto Rico has its own
separate and independent tax system. Although
it is modeled after the U.S. system, there are
differences in law and tax rates.
So, do you have an answer to my question? I know they have to file a federal 1040 for US as they have taxable pension income. They are just living in Puerto Rico - not making any income from Puerto Rico. So not required to file a Puerto Rico return. So are there any tax breaks or am I just looking for something that is not there?
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Google for a tax preparer located in Puerto Rico - call them for a consult
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Puerto Rico has an independent tax system because Congress allows them to do that. It's much less "independent" than the tax system of (for example) the Navajo Nation, which was established by treaty and is therefore superior to the Constitution.
You are looking for some sort of privileges -- other than American citizenship -- that are not there.
