What Is Act 60 in Puerto Rico? The 2026 Rules, Explained in Plain English

Let us tell you something we say to every family who sits across from us at dinner and asks about the taxes: we did not move to Dorado for the tax benefits. We moved because we wanted a life that felt alive. The tax picture made a good decision a great one — in that order, and never the reverse.

But no honest conversation about moving to Puerto Rico is complete without the tax conversation, because the incentives are genuinely significant, and because they attract more misunderstanding, wishful thinking, and over-promising than almost any other topic in the relocation world. And in 2026, that became more dangerous than ever — because the law changed materially, and a great deal of the advice still circulating online describes a version of Act 60 that no longer applies to new applicants.

So pour yourself a coffee, and let us give you the accurate, current picture — the map you bring to the professionals who will give you actual advice.

Act 60 of 2019 consolidated Puerto Rico's earlier incentive programs — most notably the former Acts 20 and 22 — into a single code. If you're an individual thinking about relocating, two pieces matter most. The Individual Resident Investor program (the former Act 22, now Chapter 2) governs your passive income — interest, dividends, capital gains. The Export Services program (the former Act 20, now Chapter 3) offers a preferential corporate rate — historically 4% — on qualifying income from services exported from Puerto Rico. The consolidation didn't change the rates so much as unify the framework, the application portal, and the compliance regime.

Simple enough. Then came 2026.

In 2026, Puerto Rico enacted Act 38-2026, amending the Individual Resident Investor program in ways that make the timing of your application one of the single most consequential details of your entire move. Anyone researching this now needs to understand that two different versions of the law exist in parallel.

Under the prior rules, qualifying Individual Resident Investors enjoyed no Puerto Rico income tax on Puerto Rico–sourced interest and dividends, and — for appreciation accruing after residency — no tax on long-term capital gains. Zero. That's the version your golf buddy told you about, and the version most of the internet still describes.

Under the amended rules, applications filed on or after January 1, 2027 face a 4% preferential rate on interest and dividend income, and a 4% rate on post-residency long-term capital gains, rather than full exemption. Before you sigh — the trade came with something the old regime never offered. The program's sunset was extended dramatically, from 2035 all the way out to December 31, 2055. Decades of certainty, instead of a clock ticking toward a question mark. For a family planning a whole life here, that certainty is worth something real.

Three more changes matter for families like yours. First, the eligibility rule tightened: new applicants must show they were not Puerto Rico residents in the six years before moving — the program wants genuinely new capital and new neighbors. Second, the primary-residence requirement — every Individual Resident Investor must acquire a Puerto Rico primary residence within two years of the decree — now requires that the home be owned directly by the individual, jointly with a spouse, or through a qualifying trust. No longer through an LLC or any other entity, which quietly reshapes ownership and estate planning for a lot of families. Third, the compliance regime tightened across the board: enhanced annual reporting, certified CPA letters, documentation of income sources, and — for those with digital assets — detailed wallet and transaction reporting to establish that gains are genuinely post-residency.

If you already hold a decree, or filed before the amendments, the picture is favorable. Existing decrees under Act 60 — or its predecessor, Act 22 — are grandfathered unless revoked, and generally remain valid through their original terms. Pending applications filed before the amendments may even request evaluation under the new rules if that proves more advantageous, and existing holders can, in some cases, renegotiate to access the new long-horizon framework. This is precisely the kind of election that belongs in a conversation with a current Puerto Rico CPA — not a decision to make from a newsletter, even ours.

No, you do not have to give up your U.S. citizenship. This one comes up at every cocktail party, and it deserves a gentle, permanent burial. Puerto Rico is the United States. Moving here is legally a domestic move — no passport, no expatriation, no dramatic renunciation ceremony. You remain, in every legal sense, an American citizen on American soil. The tax treatment changes because of Puerto Rico's unique status under the Internal Revenue Code, not because you left America.

One more thing worth saying plainly, because the people who over-promise never do: none of this eliminates U.S. federal tax altogether. Income from mainland sources — a mainland salary, a mainland-operated business, mainland rental income — generally remains subject to U.S. federal tax. And the IRS now runs an active, well-publicized enforcement campaign specifically targeting Puerto Rico residency and Act 60 claims. The lesson is not to be afraid. It is to be meticulous. The people who get in trouble are the ones who treated this as a paperwork formality. The people who are fine are the ones who actually moved their lives here and kept the records to prove it.

If you are weighing whether to file under the prior framework versus the amended one, understand that this is a high-stakes, time-sensitive decision unique to your income structure — exactly the kind of thing that should be modeled by a Puerto Rico CPA who specializes in Act 60, with your actual numbers, your timeline, and your residency history on the table. Do this early. The good news, which we wish someone had told us at the beginning: there is an entire, mature professional ecosystem here built around families exactly like yours. You are not the first to do this, not by a long way, and you do not have to invent the path.

But we'll leave you where we started, because it is the truest thing we know about this move. The families who thrive here came for the life — the gold light in the late afternoon, the neighbors who become family, the Tuesday that feels like a vacation. The tax picture made a good decision a great one. In that order. Never the reverse.

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This is the map, not the advice — we are not attorneys or tax advisors, and the rules are intricate and fact-specific. This article is drawn from The Dorado Beach Insider by Tim & Julie Harris, the book on Act 60, real estate, and the real story of life on Puerto Rico's Gold Coast. Get the book and join the community at doradobeachinsider.com.