Why Some Millionaires Are Choosing To Move to Puerto Rico for Tax Reasons
Written by
Stacy Sare Cohen
Edited by
Jenna Klaverweiden
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As the tax situation has gotten more contentious in the U.S., tax professionals have watched more millionaires look for alternatives to hold on to their millions.
“A lot of folks don’t realize that Americans pay some of the highest taxes in the world, especially in states like California and New York,” said Andrew Lokenauth, U.S. tax professional and founder of Fluent in Finance and The Finance Newsletter. “When you add up federal, state and local taxes, some people end up giving away over 50% of their income.”
GOBankingRates talked to experts to get their insights on why some millionaires are relocating to Puerto Rico. The tropical climate and Caribbean lifestyle are nice perks. However, the real draw may be saving their millions.
Act 60 Tax Incentive
One of Puerto Rico’s Act 60 tax incentives lets you pay just 4% on business income in most cases. Lokenauth said he moved his consulting business there in March 2024 and described the tax savings as “incredible.”
“My effective tax rate dropped from around 45% to under 10% — that’s life-changing money that I can reinvest back into growing my company,” Lokenauth said.
Erik Wright, founder of New Horizon Home Buyers, explained that this incentive is beneficial for millionaires.
“Puerto Rico’s Act 60 tax incentives offer breathtaking tax relief that lowers income tax rates to a paltry 4% for qualifying businesses,” he said. “This drastic tax reduction from more than 37% mainland rates is a powerful economic incentive for millionaires to relocate, potentially saving them hundreds of thousands of dollars annually, depending on their income structure.”
And he has seen his high-net-worth investor clients benefit. “I saw it myself when some of my real estate investment partners moved to Puerto Rico in 2023; one of them, who had been paying more than $400,000 in federal income taxes every year, cut his tax bill to about $40,000 by taking advantage of Puerto Rico’s tax breaks while keeping his mainland business operation online,” he said.
Capital Gains Tax Exemption
Lokenauth explained that another big draw is the capital gains exemption, where people don’t pay any taxes on certain capital gains after they become residents, which can especially help the wealthy save money.
“Back in Chicago, I was paying 20% federal plus 5% state tax on my investment gains. But after establishing residency in San Juan, I sold some long-term stock holdings completely tax-free (saved about $140K in taxes),” he said.
Zero Tax on Crypto Profits
In the U.S., the government treats crypto profits as capital gains and taxes them up to 37%, but Puerto Rico considers crypto gains tax-free for residents.
Lokenauth said the zero tax on crypto gains draws a ton of wealthy traders and blockchain entrepreneurs, and he’s met several crypto millionaires in his neighborhood who have moved there for the tax exemptions and benefits.
The Perfect Package
But Lokenauth said there is more to the island than saving money.
“Puerto Rico has incredible weather, gorgeous beaches and a vibrant culture that blends Caribbean and American influences — and San Juan feels very familiar to mainland Americans — with all the same stores, restaurants and services [they’re] used to,” he said. “The lifestyle upgrade combined with the tax benefits makes it a compelling package.”
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