Frequently Asked Questions
Who is eligible for the Exclusion of Puerto Rican Source Income?
Must be a bona fide resident of Puerto Rico for the entire taxable year. Also provides a partial exclusion for the year of a move if resident for at least 2 years prior.
How does the Exclusion of Puerto Rican Source Income work?
Excludes income derived from sources within Puerto Rico from U.S. federal gross income for bona fide residents of Puerto Rico.
What law authorizes the Exclusion of Puerto Rican Source Income?
The Exclusion of Puerto Rican Source Income is authorized under IRC §933 of the Internal Revenue Code (Title 26, United States Code).
Statutory Text — IRC §933
Source: Internal Revenue Code, Title 26, United States Code
§ 933. Income from sources within Puerto Rico
The following items shall not be included in gross income and shall be exempt from taxation under this subtitle:(1) Resident of Puerto Rico for entire taxable yearIn the case of an individual who is a bona fide resident of Puerto Rico during the entire taxable year, income derived from sources within Puerto Rico (except amounts received for services performed as an employee of the United States or any agency thereof); but such individual shall not be allowed as a deduction from his gross income any deductions (other than the deduction under section 151, relating to personal exemptions), or any credit, properly allocable to or chargeable against amounts excluded from gross income under this paragraph.
(2) Taxable year of change of residence from Puerto RicoIn the case of an individual citizen of the United States who has been a bona fide resident of Puerto Rico for a period of at least 2 years before the date on which he changes his residence from Puerto Rico, income derived from sources therein (except amounts received for services performed as an employee of the United States or any agency thereof) which is attributable to that part of such period of Puerto Rican residence before such date; but such individual shall not be allowed as a deduction from his gross income any deductions (other than the deduction for personal exemptions under section 151), or any credit, properly allocable to or chargeable against amounts excluded from gross income under this paragraph.
(Aug. 16, 1954, ch. 736, 68A Stat. 293; Pub. L. 99–514, title XII, § 1272(d)(3), Oct. 22, 1986, 100 Stat. 2594.)
Editorial Notes
Amendments1986—Pub. L. 99–514 inserted “, or any credit,” in pars. (1) and (2).
Statutory Notes and Related Subsidiaries
Effective Date of 1986 AmendmentAmendment by Pub. L. 99–514 applicable to taxable years beginning after Dec. 31, 1986, with certain exceptions and qualifications, see section 1277 of Pub. L. 99–514, set out as a note under section 931 of this title.