Puerto Rico Housing Incentives
Law 132 – Housing Incentives Act
Creates an incentive program aimed at facilitating and promoting the purchase of residential property and other real estate, on all levels.
Eligibility: Individual, estate, corporation, partnership or trust, resident or nonresident buyer in Puerto Rico that:
- Purchases a new residential property between September 1, 2010 and October 31st, 2011, to rent, or rents an existing residential property located in Puerto Rico
- Purchases any existing residential property located in Puerto Rico that is suitable for family housing and which is not a new construction
Purchases any existing nonresidential property located in Puerto Rico between September 1, 2010, and October 31st, 2011
Price of nonresidential property cannot exceed $3 MM
Benefits under this law:
Tax Concession – Income earned from rental of eligible residential property will be 100% exempt from Puerto Rico’s income tax
Tax-exemption period – up to 10 taxable years starting January 1, 2011 and ending on October 31st, 2020
New Residential Property
- 100% exemption on capital tax gains at time of resale if seller purchases property during the abovementioned time frame
- 100% exemption from internal revenue stamps fees, registration vouchers, and filing fees associated with purchase deed and the buyer’s mortgage deed
- 100% exemption from special state property tax
- 100% property tax exemption for five years
Existing residential properties and nonresidential properties (up to $3 MM)
- 50% exemption on capital gains
- 50% exemption on capital tax gains at time of resale if seller purchases property during the abovementioned time frame
- 50% exemption from internal revenue stamps fees, registration vouchers, and filing fees associated with purchase deed or the buyer’s mortgage deed, during the abovementioned time frame
Under the program, anyone buying a new home while the law is in effect will pay nothing for stamps and internal revenue vouchers, which represent a significant chunk of closing costs. In addition, those who sell an existing property during this period also will be exempt from paying additional stamps and vouchers to cancel their mortgage.
Owners of new property acquired under the law will be exempt for five years from paying property taxes to the Municipal Revenue Collections Center.
In addition, those who acquire a residential property (whether new or existing) or a commercial property worth up to $3 million, with a capital gain from such a sale, will pay zero taxes on the capital gain. In the case of an existing home, they would only pay 50 percent on the capital gain.
The program also increases to $5,000, from the current $1,000, the available credit taxpayers can claim against their capital-gain losses if the sale of their home is completed within the program’s timeframe. The credit can be claimed annually until the loss is covered.
A related program is aimed at new and existing residential properties worth up to $300,000. Under this program, the mortgage bank can finance up to 105 percent of the home’s sale price and the mortgage insurance would cover 17 percent of the risk, while the mortgage bank would assume the remaining risk of up to 88 percent.
Another related program offers a second mortgage loan of up to $25,000, on which the homeowner is waived from paying interest for 10 years.
In an attempt to stimulate the rental market, owners who make their property available for renters, whether new or existing, will pay zero taxes for 10 years on the net rental income.
|Previous Cost||Current Cost|
|Average Unit Price||$365,000||Average Unit Price||$270,000|
|Mortgage – 6% 30 yr term||$2,093 Monthly||Mortgage – 6% 30 yr term||$ 982 Monthly|
|Property Taxes Est.||$1,800 Annual||Property Taxes Est.||$0|
|Closing Costs/Stamps||$5,000+||Closing Costs/Stamps||$0|
- UP TO 100% Financing
- AS LOW AS 2.99% Mortgage – First 5 years
- 40 Year Amortization
- No Closing Costs
- No Property Tax – 5 Years
- No Capital Gains Tax
- No Rental Income Tax – 10 Years