What is a Bona Fide Resident of Puerto Rico?

A Bona Fide Resident under IRC §937 is an individual who passes the Presence Test, has their tax home in Puerto Rico, and has no closer connection to the U.S. mainland or any foreign country during the tax year. Bona Fide status is required to claim Act 60 incentives and the IRC §933 exclusion on Puerto Rico-source income.

How many days must I be in Puerto Rico to pass the Presence Test?

The most common path is spending at least 183 days physically present in Puerto Rico during the tax year. There are four alternate ways to meet the test, including spending no more than 90 days in the U.S., earning less than $3,000 of U.S. source earned income while spending more days in PR than the U.S., having no significant connection to the U.S., or being present in PR for 549 days across a three-year period.

What counts as my tax home?

Your tax home is the general area of your main place of business, employment, or post of duty. To pass the Tax Home Test, your principal place of work must be in Puerto Rico for the entire tax year (with limited exceptions for the year of the move).

How do I prove a Closer Connection to Puerto Rico?

The IRS looks at where your permanent home, family, belongings, social and religious affiliations, banking, vehicle registrations, voter registration, and driver's license are located. The more of these you move to Puerto Rico — and the fewer you keep stateside — the stronger your closer-connection claim.

Guide

How to Become a Bona Fide Resident of Puerto Rico

To unlock Puerto Rico Act 60 benefits — 4% corporate rate on export services, 0% on qualifying dividends, capital gains and interest, and the federal IRC §933 exclusion — you must qualify as a Bona Fide Resident under IRC §937. That means passing three separate IRS tests every tax year: the Presence Test, the Tax Home Test, and the Closer Connection Test. This is the practical checklist professionals use when moving to the island.

1. The Presence Test

You meet the Presence Test for the tax year if you satisfy any one of these five conditions:

Be physically present in Puerto Rico for at least 183 days during the tax year.
Be present in Puerto Rico at least 549 days across a rolling three-year period, including 60+ days each year.
Be present in the U.S. mainland for no more than 90 days during the tax year.
Have less than $3,000 of earned income from U.S. sources and spend more days in PR than in the U.S.
Have no significant connection to the United States during the tax year.

Keep contemporaneous records: boarding passes, calendars, credit-card location data, and a day-by-day log. The IRS expects documentation.

2. The Tax Home Test

Your tax home is the general area of your principal place of business or employment. To pass, your tax home must be in Puerto Rico for the entire tax year (the year of the move has a partial year-of-move rule). Practical signals:

Your primary office, co-working space, or client base is in PR.
You bill, invoice, and contract from a Puerto Rico address and EIN.
Remote workers should not maintain a desk or assigned workspace on the mainland.
Travel for work is treated as time away from your tax home, not a shift of it.

3. The Closer Connection Test

You must have a closer connection to Puerto Rico than to the U.S. mainland or any foreign country. The IRS weighs the factual pattern of your life — not any single item. Move as many of these to PR as you can:

Permanent home (owned or long-term lease) in Puerto Rico.
Spouse, dependent children, and immediate family relocated.
Personal belongings, vehicles, and pets in PR.
Puerto Rico driver's license and vehicle registration.
Voter registration in PR; cancel stateside registration.
Primary bank, brokerage, and credit cards billed to a PR address.
Doctors, dentist, gym, religious community, and social clubs in PR.
Professional licenses, business filings, and CPA based in PR.

Move-year checklist

Sign a Puerto Rico lease or close on a home before the move.
Ship belongings and update USPS and all account addresses to PR.
Get a PR driver's license and register your vehicles locally.
Cancel mainland voter registration; register to vote in PR.
Open a PR-based bank account; route payroll and key bills through it.
File Form 8898 with your federal return for the year you establish residency.
Apply to the DDEC for your Act 60 decree and pay filing fees.
Start a daily presence log and back it up with travel receipts.
Engage a CPA fluent in both federal and Puerto Rico systems.

Common pitfalls

Keeping a stateside home that family uses year-round.
Spending more than 90 days on the mainland without hitting the 183-day PR floor.
Failing to file Form 8898 in the move year.
Treating Act 60 benefits as automatic — they require annual compliance and reports.
Mixing PR-source and U.S.-source income without clear sourcing analysis.

Next steps

Model your tax liability under Act 60 vs. other structures with the Elevate Tax comparator, and read our Act 60 overview for decree requirements, rates, and ongoing compliance.

Open comparator Read Act 60 guide

This guide is educational and not legal or tax advice. Consult a qualified CPA or tax attorney before relying on it.