I've received a seriously large order and if I can get the parts to build all the boards I will make enough money to want to avoid paying any more taxes than I have to. I was looking up something unrelated and stumbled across a totally legit way to avoid paying federal income tax at all, moving to Puerto Rico!
Yeah, I've only made a first pass at it, but it appears you can avoid all federal and state income taxes and only pay much lower Puerto Rico taxes if you are a resident and run a business. This doesn't work for salary, but other income is only taxed at 4%. Of course I'll need to check this out with a lawyer who knows the details, but it seems correct.
I don't want to throw any real numbers out, but the difference in taxes will be enough to pay for the trip, the expenses and even buy a place in Puerto Rico I can use as a winter home and/or rent out when I'm not there.
Once this year is over, I can resume a US residence since I won't be making this kind of money again. So it's a bit like serving a 6 month jail sentence for robbing a bank, except I get to keep the money and the prison is not a bad place to be at all.
Maybe some additional reading is in order, because it sounds like you think you hit upon one of those free lunches that nobody else knows about and that should be setting off 105 dB alarms but the thought of all that $$$ has deafened you.
https://www.7thheavenproperties.com/2020/07/puerto-rico-residency/
So, for example, you seem to think that you can pop over there for a year and enjoy the advantage of lowered taxes for that year and then pop back to the mainland and continue along with all that cash..."Once this year is over, I can resume a US residence since I won't be making this kind of money again.", but it does not seem like you satisfy the main requirements (and that is an interpretation from folks that sell real estate there)
See citation: Spend at least 549 days in Puerto Rico during the 3-year period of the current tax year and the 2 preceding years, including at least 60 days in Puerto Rico during each tax year.
Write again when you have read and understand Act 60-2019, so we don't ask you what you have been smoking.
Part of the reason I posted this here is because I can use some sanity checking. I appreciate the feedback. Oh, and I will be contacting a lawyer to make sure I dot the I's and cross the T's. But I think you did not read fully on this issue. There are five conditions for establishing a "bona fide residency" in Puerto Rico. However...
"satisfying just a single one is sufficient"
So 183 days in the tax year OR 549 days in the current and two previous will suffice. You can also qualify by spending no more than 90 days in the year in the US or two others. Logical OR, not logical AND.
Then you also have to meet the requirements of Puerto Rico to get the 4% tax rate. Salary is taxed separately at a higher rate. Looks like property taxes are high. So it's not a free lunch, but well worth the price.
BTW: "I will make enough money to want to avoid paying any more taxes than I have to." What is your threshold for not wanting to pay any more taxes than you have to?
If we are talking about $5, I'm not leaving the country. I'm not even leaving my chair. Hmmm... I need to stop thinking of Puerto Rico as being outside the US. It's not.
You are too intent on trying to show that I am wrong and seem to be spending almost no time trying to understand why your plan is half-baked with virtually no chance of succeeding as you think it will. The CYA with a 'sanity check' based on a posting in a public electronics forum (what could go wrong?) is a dead giveaway.
Nevertheless, I guess I did not read thoroughly, in fact, I spent about 5 min reading before I knew it was a half-baked plan, to be kind. So, yes, you got me there, so you are good to go...but let's check...which ONE of these do you satisfy? [I assume they mean mainland USA, but they are real estate people not tax lawyers]
Firstly, an individual must be “present” in Puerto Rico for defined period. To pass this test, an individual should be able to satisfy 1 of the following conditions:
Be present in Puerto Rico for a minimum of 183 days in the tax year.You have ~70 days to get over there, so yeah, that's possible.
Spend at least 549 days in Puerto Rico during the 3-year period of the current tax year and the 2 preceding years, including at least 60 days in Puerto Rico during each tax year.Nope, not this one
Not be present in the USA for more than 90 days during the tax year.Nope, not this one (unless, of course you really are in Antarctica)
Not earn more than $3,000 in earned income in the USA during the tax year and be present in Puerto Rico for more days than in the USA.Gotta say no on this one as well.
Have no significant connection to the USA during the tax year.Again, thinking nope.
So, since I did not read it well, let's assume that you are moving there tomorrow and living there for the next 183 days...now you are good to go, except....rather than boolean dumfuckery to show that I am wrong, you could have just read a little further...
Secondly, an individual should not have a “tax home” outside of Puerto Rico.This means that Puerto Rico should be your primary place or residence or your primary place of employment. To benefit from the tax advantages under Act 60-2019 (detailed below) an individual must purchase property in Puerto Rico within 2 years. This property must be the individual’s primary residence and not rented out.Read this one carefully - when did you buy a home/office there?
Thirdly, an individual should not have a “closer connection” to the USA or to a foreign country than to Puerto Rico.Various factors such as the presence of an individual’s permanent home, family, belongings, principal bank and business in Puerto Rico, as well as the existence of professional, cultural, religious, social and political affiliations and links in Puerto Rico, may help to demonstrate a closer connection to Puerto Rico than to anywhere else.That is a big fat open-ended test that you or your lawyer do not get to decide and, IMO, it is designed to prevent people from doing what you want to do....which you have now publicly stated
Rather than a clever response, do yourself a favor and read a little more about the issue: Here is a good start
https://ustax.bz/puerto-rico/Finally, I want to avoid paying more taxes than I have to,
regardless of how much money I earn. Lots of good honest people think the same way and don't start thinking that way based on the possibility of a big increase in earnings.
To borrow from Professor Kingsfield, "...here is a dime. Take it, call your mother, and tell her there is serious doubt about you moving to PR to avoid paying taxes"