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PR - Buying, renting a home in Puerto Rico: Tax incentives create an issue

As demand has surged in Puerto Rico’s tourism sector, investors have been keen on the island’s short-term rentals.

Jennifer Márquez can spot a home renovation in Puerto Rico by an investor who’s not from the island right away.

“When you drive around, you see this,” she said. “You can tell when it's a local person or an outsider.”

The giveaway is the style choices these investors make; the layout and finishes look nothing like the homes she grew up seeing in Puerto Rico.

It’s Márquez’s job to notice the details. Márquez, who was born and raised in Puerto Rico, is the founder of The Reserve LLC, a hospitality management company that among other things, manages vacation rental properties on the island. Her customers are property owners, both U.S. mainlanders and locals.

Her business is growing alongside record growth in Puerto Rico’s tourism industry. Puerto Rico’s tourism growth has been helped by visa-free travel and short flights for U.S. citizens living in the states coupled with high COVID-19 vaccination rates among Puerto Rico’s local population.

As demand has surged in Puerto Rico’s tourism sector, investors have been keen to increase supply, particularly among the island’s short-term rentals. Some Puerto Ricans believe investors from the states have been given unfair advantages in their homeland.

“Every single home that you see that is going through a renovation, it's getting ready for Airbnb. It's not getting ready to be a (long term) rental home,” Márquez said. “So, you have locals, and then you have the international, you know, travelers who saw potential because of Act 20 and Act 22.”

For mainlanders eyeing property in Puerto Rico, buying beach-adjacent property as a second home or for a short-term rental business (or some combination of both) seems like a luxurious deal, especially when considering the tax benefits Puerto Rico offers to them.

Why is it so attractive for US mainlanders to buy property in Puerto Rico?

Act 20 and Act 22 (now collectively known as Act 60) are tax incentives for U.S. mainlanders to lure them into investing in and taking residency in Puerto Rico. Americans who move existing or create qualifying businesses or investments to Puerto Rico can lower their federal income tax rate from up to 37% in the states to zero on income earned in Puerto Rico.

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