Act 60 Puerto Rico

Published: February 20, 2026 | Act60pr.com

On February 17, 2026, the Puerto Rico Legislature approved House Bill 505 (HB 505), the biggest proposed update to the Resident Investor incentive program since it was first created back in 2012. The bill now heads to Governor Jenniffer González-Colón for her signature and must then receive fiscal compliance certification from the Financial Oversight and Management Board (FOMB) under PROMESA Section 204 before becoming law.

Here’s everything you need to know.

A Quick Refresher: What Is the Resident Investor Program?

Puerto Rico’s Resident Investor program — originally launched as Act 22 in 2012 and later rolled into the Puerto Rico Incentives Code as Act 60 in 2019 — is one of the most talked-about tax incentive programs in the United States. The idea is straightforward: if you relocate to Puerto Rico and make it your real home, you can significantly reduce your tax burden on investment income like capital gains, dividends, and interest.

Under the original program, qualifying investors who moved to the island enjoyed a 0% tax rate on that income. That’s not a typo — zero percent. Combined with the fact that bona fide Puerto Rico residents are exempt from federal income tax on Puerto Rico-sourced income (thanks to Section 933 of the Internal Revenue Code), it created one of the most compelling tax planning opportunities available to U.S. citizens.

The program was always set to expire in 2035. HB 505 just changed that — and a few other things along with it.

What HB 505 Would Change (If Signed Into Law)

The Rate Goes from 0% to 4% for New Applicants

Starting with applications filed after December 31, 2026, new Resident Investors would pay a 4% flat tax on interest, dividends, and capital gains earned after becoming a Puerto Rico resident. That’s up from the 0% rate available to earlier applicants.

To put that in perspective: the top federal capital gains rate on the mainland is 20%, plus a 3.8% Net Investment Income Tax — that’s 23.8% before you even factor in state taxes. California adds another 13.3%. New York City residents can face a combined rate above 35%. Puerto Rico’s new 4% rate is still dramatically lower than what most high-income investors pay stateside.

The 4% rate was not picked out of thin air. In 2024, Puerto Rico’s Department of Economic Development and Commerce (DDEC) commissioned a study that found the program had generated over 75,000 direct and indirect jobs, contributed $650 million in tax revenue, and driven at least $10 million annually in charitable donations. The study specifically concluded that raising the rate to 4% would keep the program competitive while generating meaningful additional revenue.

The Program Would Run Through 2055

Previously, the Resident Investor program had a 2035 sunset — meaning no new decrees could be issued after that year. HB 505 would push that deadline out by 20 years to 2055. This is a big deal for anyone thinking about long-term wealth planning. A program expiring in less than a decade creates uncertainty. A program with a 30-year runway would signal that Puerto Rico is serious about keeping this incentive in place for the foreseeable future.

Existing Decree Holders Would Be Fully Protected

If you already have a Resident Investor decree — whether it was issued under the original Act 22 or the current Act 60 — nothing would change for you. Your 0% rate stays intact. Your decree terms would remain exactly as they were when you signed. The bill reaffirms that all existing rights and obligations under previously granted decrees will be honored.

There Would Still Be a Window to Get the 0% Rate

Under HB 505, applications filed before January 1, 2027 would still qualify for the 0% tax framework. The key date is when you submit your application, not when the decree is approved. So if you file your application before the end of 2026, you could lock in the existing terms even if the approval process takes several months.

Applicants who filed before the cutoff would also have the option to choose the new 4% framework instead, if they prefer the longer 2055 sunset for their decree.

Current Decree Holders Could Opt In to the New Terms

Here’s an interesting wrinkle: if you already have a decree with the 0% rate but your sunset is 2035, you would be able to voluntarily amend your decree to switch to the 4% rate in exchange for extending your sunset to 2055. Nobody would be required to do this — it’s purely optional. But for investors who are thinking about staying in Puerto Rico well beyond 2035, it could make sense to trade the lower rate for 20 extra years of coverage.

No More Buying Your Home Through an LLC

Under the existing rules, Resident Investors are required to buy a primary residence in Puerto Rico within two years of getting their decree. Some investors had been purchasing that property through an LLC or other legal entity rather than in their own name.

HB 505 would close that door for new applicants filing after December 31, 2026. Going forward, the home would need to be titled directly in the investor’s name (or jointly with a spouse), or held through a qualifying trust. The title must be registered at the Puerto Rico Property Registry accordingly.

Six-Year Prior Residency Requirement

For applications submitted after December 31, 2026, the applicant must show they have not been a resident of Puerto Rico for at least six years before their relocation. This is designed to ensure the program attracts genuinely new residents to the island rather than people who were already living there.

The 10-Year Rule on Pre-Move Gains Still Applies

One thing HB 505 does not change is the treatment of capital gains on assets you owned before moving to Puerto Rico. Those pre-move gains are still subject to U.S. tax rules. However, after 10 years of bona fide Puerto Rico residency, long-term gains from pre-move appreciation qualify for a 5% rate instead of regular income tax rates. For post-2026 applicants, this benefit applies to gains recognized before January 1, 2056.

What Happens Next

HB 505 has been approved by the Legislature and now goes to Governor Jenniffer González-Colón for her signature. After that, it needs fiscal compliance certification from the Financial Oversight and Management Board (FOMB) under PROMESA Section 204. Until both steps are completed, HB 505 is not yet law.

The revenue numbers are worth noting: Puerto Rico’s Legislative Budget Office estimated HB 505 would bring in an additional $27.8 million to $60.6 million in fiscal year 2027. By fiscal year 2037, the extension of existing decrees is projected to generate an additional $270.7 million in revenue. That’s the kind of data that makes this program politically durable — it’s demonstrably good for Puerto Rico’s economy.

The Bottom Line

If HB 505 is signed into law, the Resident Investor program isn’t going anywhere. If anything, the bill would make it more sustainable by introducing a modest tax rate that still undercuts virtually every state on the mainland while extending the program’s life by two decades.

If you already have a decree in Puerto Rico, you’d be fully protected. If you’ve been thinking about making the move, the bill as written would give you until December 31, 2026 to apply under the 0% rate. And even after that date, a 4% flat rate on investment income — in a jurisdiction with no state income tax and federal exemption on Puerto Rico-sourced income — would still be one of the best deals available to U.S. investors.

We’ll update this article as HB 505 moves through the Governor’s office and FOMB review.

Frequently Asked Questions

What is HB 505?

House Bill 505 is legislation approved by the Puerto Rico Legislature on February 17, 2026 that would update the Resident Investor program under Act 60-2019. If signed into law, it would raise the tax rate from 0% to 4% for new applicants filing after December 31, 2026 and extend the program through 2055.

Does this affect existing decree holders?

No. If you already have a Resident Investor decree, the bill would leave your terms — including the 0% rate — unchanged.

What’s the deadline to apply under the 0% rate?

Under HB 505, you would need to file your application before January 1, 2027. The filing date is what counts, not the approval date.

How does the 4% rate compare to mainland U.S. taxes?

The top federal rate on long-term capital gains is 23.8% (20% plus the 3.8% NIIT). Most states add their own tax on top of that. Puerto Rico’s 4% flat rate remains significantly lower than any mainland alternative.

Can I still buy my home through an LLC?

Not under the proposed new rules. For applications filed after December 31, 2026, the primary residence would need to be purchased directly by the investor, their spouse, or through a qualifying trust.

How long would the program last?

HB 505 would extend the Resident Investor program from 2035 to 2055 — a 20-year extension.

Could current decree holders extend their sunset to 2055?

Yes, but only by voluntarily amending their decree to adopt the new 4% rate. This would be optional.

Is HB 505 signed into law yet?

As of February 20, 2026, HB 505 has been approved by the Legislature and is awaiting the Governor’s signature and FOMB fiscal compliance certification.

What are the residency requirements?

To qualify as a Resident Investor, you must become a bona fide resident of Puerto Rico. This means spending at least 183 days per year on the island, maintaining your tax home in Puerto Rico, and demonstrating a closer connection to Puerto Rico than to any other jurisdiction. You must also purchase a primary residence within two years and make a $10,000 annual donation to qualified Puerto Rico nonprofits.

The information in this article is for educational purposes and does not constitute legal, tax, or financial advice. Always consult with qualified professionals before making decisions about tax incentive programs.