If you're a bona fide resident of Puerto Rico, you'll be able to exclude income from Puerto Rican sources on your U.S. income tax return. However, this exclusion from U.S. income taxation doesn't apply to amounts you receive for services performed as an employee of the United States or any agency thereof. If you're a bona fide resident and have to file a U.S. income tax return, then you can claim deductions and credits that are allocable to or chargeable against income required to be reported on your U.S. income tax return. You can't claim deductions and credits allocable to or chargeable against Puerto Rican source income that you excluded on your U.S. income tax return. In addition, you can claim deductions and credits that aren't specifically attributable to income from either Puerto Rican or non-Puerto Rican sources, but you must allocate such deductions and credits between income from Puerto Rican sources and income from all other sources (worldwide) to find the part that you can claim on your U.S. income tax return. Examples of these types of allocable deductions and credits are the standard deduction and certain itemized deductions such as medical expenses, charitable contributions, real estate taxes, and mortgage interest on your personal residence. Child Tax Credit expanded to residents of Puerto Rico Beginning with tax year 2021, eligibility for the child tax credit (CTC) expanded to residents of Puerto Rico with one or more qualifying children. For 2023, the initial amount of the CTC is $2,000 for each qualifying child. The portion of the CTC that can be claimed as a refundable credit (the additional child tax credit, or ACTC) increased for 2023 to $1,600 for each qualifying child. Residents of Puerto Rico must file a federal tax return with the IRS to claim the CTC, even if they don't have a filing requirement and have little or no income from a job, business or other source. The credit can be claimed on: Formulario 1040-SS (SP), Declaración de Impuestos Federal sobre el Trabajo por Cuenta Propia (Incluyendo el Crédito Tributario Adicional por Hijos para Residentes Bona Fide de Puerto Rico) (in Spanish) Form 1040-SS, U.S. Self-Employment Tax Return, Form 1040, U.S. Individual Income Tax Return, or Form 1040-SR, U.S. Tax Return for Seniors. Form 1040-SS (SP) is a Spanish-language form. Form 1040 and Form 1040-SR have Spanish-language versions. Any of these tax returns can be filed to claim the CTC even after the filing deadline. In fact, families who don't owe taxes to the IRS can file their 2021 tax return and claim the CTC for the 2021 tax year at any point until April 15, 2025, without any penalty. Foreign tax credit If you must report income from Puerto Rican sources on your U.S. income tax return, then you can claim a foreign tax credit for income taxes paid to Puerto Rico on the same income. To calculate your foreign tax credit, you must reduce the income taxes paid to Puerto Rico by the amount of income taxes allocable to excluded Puerto Rican source income. When claiming a foreign tax credit, you must complete Form 1116, Foreign Tax Credit. See Topic no. 856 for more information about the foreign tax credit. For more information about how to allocate deductions and credits with respect to excluded income as well as how to determine if you're a bona fide resident, refer to Topic no. 901, Publication 570, and Publication 1321 PDF.
