Puerto Rico the New Tax Haven for Crypto Investors
We recently wrote how dangerous it is to not report your Bitcoin investment and other cryptocurrency assets to the IRS. While this remains true, there might be an option for some crypto investors to dodge taxes on their gains if they became residents of Puerto Rico. Let’s see how much of this can become reality.
How Can Crypto Investors Skip Taxes in Puerto Rico
According to a number of tax advisers as reported by Cointelegraph, if a U.S. taxpayer moves to Puerto Rico and receives a resident status, they would be able to sell their cryptocurrencies and keep 100% of the gains for themselves. It is worth mentioning the fact that this strategy isn’t bullet proof. While the text from the Code says that a U.S. taxpayer is not required to include “sources from Puerto Rico”, these still have to be reported even if not taxed. Does that mean that crypto investors will pay taxes on gains in Puerto Rico? Not entirely clear. As of now, there are tax incentives for new residents of the country, especially when it comes to capital gains. Will that continue to apply in the case of crypto investments? We will have to wait and see.
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How Possible is for Puerto Rico to Become the New Tax Haven for Crypto Investors
The idea of becoming a bona fide Puerto Rico resident and saving tens or hundreds of thousands of dollars from taxes is very appealing. But in reality, how possible is for the IRS to just give up on millions, if not billions of tax money? There are already suggestions that the IRS may introduce new rules with which to try and tax at least part of the gains a crypto investor has realized. For example, if a taxpayer invested in Bitcoins or other cryptocurrencies in Protected content moved to Puerto Rico only at the end of Protected content , the most of the appreciation of their crypto assets occurred while they were residents of the United States. Therefore, the IRS will want to have the right to tax the gains from that period. Also, for you to be able to take advantage of the no tax incentives for Puerto Rico residents, you would actually have to physically move and stay there for at least one tax year. More importantly, even if you spend a year in Puerto Rico that may not be enough for the IRS to leave your crypto gains untouched. You may have to wait for a period of 5 or 10 years before you sell your assets to skip taxation on them.
Will Puerto Rico Tax Crypto Investors as Some Point
Although experts believe it is unlikely, the recent devastating events in Puerto Rico, may force the government to change some of their tax laws and regulations. The country was practically ruined by the hurricanes Irma and Maria in late Protected content did not receive much foreign aid. Its economy and social environment is not entirely stable yet, so it looks reasonable for the governors to look for ways to make up for the losses. Taxing crypto investors, even on smaller bits of their gains, for example, those accrued since they’ve become residents, could be one solution.
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