Act 60 for investors: the 0% ends on December 31, 2026

On December 31, 2026, one of Puerto Rico's most searched-for tax laws changes: Act 60, for people who move to the island and live off their investments.

If you file your resident investor application by that day, you pay 0% in Puerto Rico on interest, dividends and certain capital gains. If you file on January 1, 2027 or later, you pay 4%.

Here we explain what changed, what it really costs to keep the decree, and what you need to be able to prove. At the end you can download the full checklist for free.

Before we start
This article is educational. It is not tax or legal advice for your case. The information is current as of October 13, 2026, and the law and its regulations can change. Before you decide, talk to a CPA and an attorney who know your situation.

What is the investor decree?

Act 60 is not a single benefit. It is Puerto Rico's Incentives Code, and it has many doors. The one in this article is for you as an individual, and it is called Resident Individual Investor.

It is for people who move to Puerto Rico and live off their investments: stocks, dividends, interest, crypto. The decree gives you a special Puerto Rico rate on the interest, dividends and capital gains that build up after you become a resident.

If what you have is a business, that is a different door, with different rules.

What changed with Act 38-2026

Act 38 was signed on March 10, 2026. It changed three things for the resident investor.

1. The rate

• You file by December 31, 2026: 0% on interest, dividends and capital gains. The decree expires on December 31, 2035.
• You file starting January 1, 2027: 4%, but the decree lasts until December 31, 2055.
• Watch the clock: for DDEC, the official time of your application is the time of payment on the Incentives Portal, not the time you started filling it out.

2. Who qualifies

• Through December 31, 2026: you cannot have lived in Puerto Rico between January 17, 2006 and January 17, 2012.
• Starting January 1, 2027: you cannot have been a Puerto Rico resident during the six years before your move.

If you are Puerto Rican, live in the States and left years ago, the 2027 change may interest you. But every case should be reviewed with your attorney.

3. The home

You must buy your main residence in Puerto Rico within two years of getting the decree.

• Through December 31, 2026: it can be bought in your name, with your spouse, or through an entity organized in Puerto Rico.
• Starting January 1, 2027: only in your name, with your spouse, or in a qualifying trust.

If you already have a decree, the law respects it. You lose nothing because of this change.

An example with numbers: 0% vs. 4%

Illustrative example. John lives in Chicago. He has a portfolio of stocks and crypto, and after moving he earns about $300,000 a year in gains and interest.

• With the 0% decree, his Puerto Rico tax on that income is $0.
• With the 4% decree, it is $12,000 a year.

But that is not all it costs. The decree has fixed costs every year:

• Annual donation to nonprofits in Puerto Rico: $10,000.
• Annual report fee to DDEC: $5,000.
• Fixed total: $15,000 a year, plus buying the home and the cost of accounting and tax returns.

If your gains are small, those fixed costs can eat up the savings. That is why we recommend running the full numbers before you move.

And if you are deciding now, filing before December 31 has another advantage: DDEC clarified that anyone with a 0% decree can later ask for the extension to 2055 at 4%, as long as the law is still in effect. Filing on time does not close that door.

What the 0% does not cover

This is the most expensive mistake we see online. Act 60 lowers your Puerto Rico tax. It does not remove federal tax on everything you earn.

• As a bona fide resident of Puerto Rico, what you exclude from federal tax is your Puerto Rico-source income.
• Dividends from US corporations and interest from US banks, as a general rule, are still US-source income. The IRS still taxes them.
• The gain your investments built up before you moved has its own rules, in Puerto Rico and at the federal level. It is not automatically 0%.

How you prove you live in Puerto Rico

For all of this to work, you have to be a bona fide resident of Puerto Rico. For the IRS, being a resident is not just saying so. You have to pass three tests, all three in the same year.

1. Presence. The most common way is to be here 183 days or more in the year. Your proof is your tickets, your boarding passes and your bank statements. If you don't keep them, you have no proof.
2. Tax home. Your main job or business is in Puerto Rico.
3. Closer connection. Your life has to be more tied to Puerto Rico than to any other place.

The closer connection test is the one that confuses people most. The IRS measures it with evidence:

• Where your home is and where your family lives.
• Where you have your driver's license, your cars and your voter registration.
• Where your banks, your doctors and the groups you belong to are, like your church or your club.
• Where you keep your personal belongings.
• What address you put on your documents.

If those answers point to Chicago, for the IRS your life is still in Chicago, even if you spend your days here.

In the year you become a resident, file Form 8898 with the IRS. That form asks about exactly these things. The penalty for not filing it can be $1,000.

What you do every year

Once you have the decree, some things must be done every year, no exceptions.

The $10,000 donation

• $5,000 to entities on an official list from the Legislature, the ones that work on child poverty.
• At least $2,500 to the Special Fund for Social Equality (Fondo Especial para la Igualdad Social), with a check made out to the Secretary of Hacienda, Puerto Rico's Treasury. That payment gets you a certificate, and DDEC asks for it starting with 2026 donations.
• The last $2,500 to another qualifying Puerto Rico nonprofit.

The annual report to DDEC

It is filed on the DDEC Incentives Portal, with its fee and with proof of the donation and of your home. For most decrees, the 2025 report is due on November 16, 2026. If your decree says a different date, the date in your decree is the one that counts.

If you don't file it, this is what happens:

1. DDEC sends you a notice.
2. Fifteen days later comes an automatic $1,000 fine.
3. If you don't pay it on time, another $5,000 is added.
4. After that, the process to revoke your decree can begin.

The home

You have two years from the date you get the decree to buy your main residence. And it has to be a purchase from someone who is not a relative.

Five phrases that worry us

Diana spent more than fifteen years in audit. An auditor does not look at what you promise: an auditor looks at what you can prove. If any of these phrases sounds like you, stop before you file.

• "I'll file on the night of December 31." If something fails that day, there is no second chance.
• "My family is staying in the other state." Yes, that weighs against your closer connection.
• "The 0% covers my US dividends." It does not.
• "I'll buy the house later." You have two years, and they go fast.
• "I'll spend half the year here and half there, without counting days." No record, no proof.

And this is not theory. The IRS has had a compliance campaign on Puerto Rico residents with decrees since 2021. In December 2025, the federal Government Accountability Office (GAO) published a report asking the IRS to follow up on people who could not prove their days of presence.

Is it right for you?

• If you have large gains and you will truly live here: filing before December 31 makes a lot of sense. It locks in 0% through 2035 and does not close the extension.
• If your gains are small: run the numbers with the fixed costs before you decide.
• If you are only drawn to paying less, without moving your life: this law is not for you.

Download the investor checklist

We put together a free checklist with everything you need ready: before you file, in the first and second year of the decree, and every year after. Press the button, enter your name and your email, and you'll get it as a PDF.