Bona fide residency, by the numbers

Puerto Rico Act 60: The Day-Count Reality

Puerto Rico's Act 60 (folding in the old Acts 20 and 22) offers something no state can: because Puerto Rico–source income of a bona fide Puerto Rico resident is excluded from federal tax under IRC §933, qualifying individuals can see a 4% rate on eligible export-services income and 0% on eligible capital gains accrued after the move. But every one of those benefits hangs on two words — bona fide — and bona fide residency is defined by federal law, not by Puerto Rico. The IRS, not Hacienda, is the examiner that matters, and it has an active audit campaign aimed at exactly this population.

Three tests, all required, every year

Under IRC §937 and Treasury Regulation §1.937-1, you are a bona fide resident of Puerto Rico for a tax year only if you satisfy all three of these tests for that year: the presence test, the tax home test (your principal place of business is in Puerto Rico all year), and the closer connection test (your ties to Puerto Rico are stronger than to the U.S. mainland or any other country). Fail one, and the whole year's benefits fall.

The presence test: five ways to pass

The presence test is the quantitative gate, and it's more flexible — and more subtle — than the "183 days" shorthand suggests. You pass for a year if any one of these is true:

1. You were present in Puerto Rico at least 183 days during the year.

2. You were present in Puerto Rico at least 549 days across the current year and the two preceding years, including at least 60 days in each of those three years.

3. You were present in the United States no more than 90 days during the year.

4. You had no more than $3,000 of earned income in the U.S. and were present more days in Puerto Rico than in the U.S.

5. You had no significant connection to the United States — meaning no permanent home there, no U.S. voter registration, and no spouse or minor child living in the U.S.

Most new movers plan against prong 1, but prongs 2 and 3 are what save a year wrecked by an unexpected mainland obligation — which is why the running three-year total is worth tracking continuously, not reconstructing in April.

What counts as a Puerto Rico day

You're counted as present in Puerto Rico for any day you're physically there at any time. The regulation then adds allowances that reward careful logging:

The 30-day international allowance. Up to 30 days spent outside both Puerto Rico and the United States can be counted as Puerto Rico days — but only if you were present more days in Puerto Rico than in the U.S. that year. For someone who travels internationally, this is effectively a free month, and it's routinely forfeited by people who never logged the trips.

The transit exception. Less than 24 hours in the U.S. while traveling between two points outside it — a Miami or JFK connection — does not count as a U.S. day.

Medical and disaster exceptions. Days receiving qualifying inpatient care in the U.S., and days you're off-island because of a declared disaster (hurricanes are the obvious case), can be excluded from U.S. presence under specific conditions.

A day that touches both jurisdictions — fly out of San Juan in the morning, land in Florida in the afternoon — counts as a Puerto Rico day under the any-part rule, but the same physical day can also be a U.S. presence day for the U.S.-side limits, which is why prong-3 planning needs its own count.

The year you move

The regulations include a first-year rule (§1.937-1(f)) that can treat you as a bona fide resident for the portion of the move year after you arrive, provided you weren't a bona fide resident in the three prior years, you satisfy the tests for the final part of the year including 183 days of presence counting from arrival-year rules, and you remain a bona fide resident for the following three years. The mechanics are technical enough that the move year is the one where professional advice pays for itself most clearly — and note that for Act 60's capital-gains benefit, only gains that accrue after you become a resident get Puerto Rico treatment; built-in gains from before the move keep their U.S. character under special sourcing rules for years.

Why the IRS wins these audits

The IRS launched a formal compliance campaign on Act 60/§933 claimants and has publicly described hundreds of open examinations, with criminal referrals in the worst cases. The audits look like state residency audits with federal subpoena power: flight manifests, cell records, card transactions, and the taxpayer's own social media, assembled into a day grid. The recurring findings aren't exotic — they're people who came up short of 183 and rounded up; who kept the mainland house, family, and gym membership and failed closer-connection; or whose "Puerto Rico services business" was actually performed from a laptop in New York, failing the tax home test and mis-sourcing the income entirely.

The defense is the same as everywhere in residency law, just with higher stakes: a contemporaneous, automatic day log covering Puerto Rico, U.S., and international days separately; boarding passes and receipts attached to the borderline days; and a three-year rolling view of the 549-day prong. DayLine tracks Puerto Rico as its own jurisdiction — with the presence test built in — precisely because the difference between 181 and 183 days here isn't a state tax bill; it can be your entire federal position.

Don't forget the state you left

Act 60 movers from New York, California, or New Jersey still have to win the ordinary state-exit fight described in our leaving New York guide — the state doesn't care about §937, only about whether you abandoned domicile and beat its own statutory test. A San Juan condo plus 200 Puerto Rico days beats the IRS test and can still lose a New York audit if you kept the Manhattan apartment and spent 190 any-part days there. Two scoreboards, two counts, one calendar.

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General educational information, verified against statutes and administrative guidance at the time of writing — not tax, legal, or accounting advice. Consult a qualified tax professional about your situation. · All state rules · DayLine home