Act 60 Bona Fide Residency Checklist: 183-Day, Tax Home and Closer Connection Tests

An Act 60 decree only delivers federal tax savings if you become a bona fide resident of Puerto Rico under the IRS rules in Internal Revenue Code section 937. That requires passing three tests every year: a presence test (most people use 183 days on the island), a tax home test (your main place of work is in Puerto Rico), and a closer connection test (your life is centered in Puerto Rico rather than the mainland). This checklist explains each test in plain terms, lists the evidence that supports it, and flags the patterns that draw IRS attention.

Why bona fide residency matters

Puerto Rico's Act 60 Individual Resident Investor decree sets the Puerto Rico tax on covered interest, dividends and post-move capital gains at 0 percent for applications filed by December 31, 2026, and 4 percent for applications filed after. That is only half the picture. As a U.S. citizen you normally owe federal tax on worldwide income. The federal exclusion that makes Puerto Rico work, section 933 of the Internal Revenue Code, applies only to Puerto Rico-source income of a bona fide resident of Puerto Rico. If you hold a decree but fail the residency tests, you can end up owing federal tax on income you believed was sheltered, plus interest and penalties.

The IRS has run a compliance campaign focused on Act 22 and Act 60 taxpayers for several years, and practitioners report that audits concentrate on exactly the three tests below. Treat them as a way of living, not a form to fill in.

Test 1: the presence test and its five options

You pass the presence test for a tax year if you meet any one of these:

183 days in Puerto Rico during the tax year. This is the option most decree holders use, and the simplest to document.
549 days over three years: at least 549 days in Puerto Rico across the current and two preceding years, with at least 60 days in each of those years.
No more than 90 days in the United States during the tax year.
Limited U.S. earnings: no more than $3,000 of earned income from U.S. sources, and more days in Puerto Rico than in the United States.
No significant connection to the United States during the year. A permanent home in the U.S. or current voter registration in a U.S. state counts as a significant connection, so this option rarely fits someone who keeps a mainland house.

Days outside both Puerto Rico and the United States, such as a month in Europe, count against neither place, which is why options 3 and 4 can work for frequent international travelers. Your CPA can tell you which option gives you the most margin.

How days are counted

Any day you are physically in Puerto Rico at any point counts as a Puerto Rico day.
A day spent partly in Puerto Rico and partly in the United States, such as a travel day, counts as a Puerto Rico day.
Days in the United States for qualifying medical treatment, or to accompany a parent, spouse or child receiving it, are not counted as U.S. days, and days outside Puerto Rico for those reasons can count as Puerto Rico days.
Days you cannot return because of a major declared disaster or a mandatory evacuation affecting your area can count as Puerto Rico days for a limited period.
Passing through a U.S. airport in less than 24 hours on the way between two non-U.S. places does not count as a U.S. day.

Keep a day-by-day log. Boarding passes, credit card statements and phone location history are the evidence auditors ask for.

Test 2: the tax home test

You must have your tax home in Puerto Rico, and no tax home anywhere else, during the entire year. Your tax home is your regular or principal place of business. If you have no business, it is your regular place of abode in a real and substantial sense. For investors who manage their own portfolio, and for business owners with an export services company on the island, this generally means doing the work from Puerto Rico. Running a mainland business day to day from a mainland office while spending 183 days on the island is the classic way to fail this test.

Test 3: the closer connection test

You must not have a closer connection to the United States, or to a foreign country, than to Puerto Rico at any time during the year. This is a facts-and-circumstances comparison. The regulations list the factors the IRS weighs, with no fixed scoring:

Where your permanent home is
Where your family lives
Where your personal belongings, such as cars, furniture and art, are kept
Where the social, political, cultural or religious organizations you belong to are
Where you do your routine personal banking
Where you conduct business
Which jurisdiction issued your driver's license
Where you vote
Which address you list on forms and documents
Which official forms and documents you file

The IRS warns that a majority of factors does not automatically win. A house in Connecticut where your spouse and children live, your cars are registered and your doctor practices will usually outweigh a Puerto Rico driver's license and bank account.

The year you move

The rules soften the tax home and closer connection tests in the year you arrive. You are treated as meeting them for that year if you were not a bona fide resident in any of the three preceding years, you have no tax home outside Puerto Rico and no closer connection elsewhere for the last 183 days of the year, and you stay a bona fide resident for the following three years. In practice, someone who completes the move by about the end of June can often treat that calendar year as their first resident year. Someone who moves later typically starts with the following year. Coordinate this date with your decree application and your CPA.

Form 8898

If your worldwide gross income is more than $75,000 in the year you become, or stop being, a bona fide resident of Puerto Rico, you must file IRS Form 8898 to report the change. It is filed separately from your Form 1040, by its due date including extensions. The penalty for failing to file a required Form 8898 is $1,000 unless you can show reasonable cause. Filing it is also part of a clean record if your residency is ever examined.

The practical checklist

Practitioners commonly recommend some version of the following within the first months after moving:

Buy or lease a home in Puerto Rico and make it your principal residence. Act 60 requires purchasing one within two years of the decree.
Move your family, if you have one, and enroll children in school on the island.
Obtain a Puerto Rico driver's license and register your vehicles in Puerto Rico.
Register to vote in Puerto Rico and cancel your mainland voter registration.
Open accounts with a Puerto Rico bank and move routine banking there.
Change your address on brokerage, bank, insurance, professional licenses and government records.
Join local organizations: a church or synagogue, a club, a professional association, a charity.
Find local doctors, a dentist and a veterinarian.
Sell, rent out at arm's length, or clearly downgrade any mainland residence. If you keep it, make sure it is not your permanent home in fact.
Run your business and investment activity from Puerto Rico.
Keep a daily location log and save travel records.
File Puerto Rico income tax returns, the annual Act 60 report with DDEC, Form 8898 when required, and make the $10,000 annual donation to Puerto Rico nonprofits.

How your home fits in

Your Puerto Rico home is evidence for every one of the three tests: it is where you spend your days, where your regular place of abode is, and the first factor in the closer connection list. That is one reason decree holders increasingly choose a property they genuinely want to live in year-round rather than a pied-à-terre. For applications filed after December 31, 2026, the residence must be titled to you personally, jointly with your spouse, or to a qualifying grantor trust. See the Act 60 real estate requirement for how farms and rural estates fit, and relocating outside San Juan for what daily life is like beyond the metro area.

For buyers who want land and privacy, the estate this site describes is one option: about 100 acres at 2,100 feet in Cayey, near Aibonito and about an hour from San Juan, with a remodeled three-bedroom main house, a second residence, two creeks, a 550-foot well, a 12,000-gallon cistern, Starlink and a generator hookup. It is offered at $2,375,000, reduced from $2,500,000, or on a $15,000 per month furnished lease or a lease with option to buy, with owner financing available. Details are on the main page, and private visits can be arranged through the inquiry form.

Frequently asked questions

Is 183 days in Puerto Rico enough to be a bona fide resident?

No. The 183-day rule is one way to pass the presence test, but you must also pass the tax home test and the closer connection test for the year. Someone who spends 183 days on the island while their family, home and business stay on the mainland usually fails.

Can I keep my house on the mainland?

You can own it, but it must not remain your permanent home in fact. A mainland house where your family lives or where you spend significant time weighs heavily in the closer connection test, and a permanent U.S. home also rules out the no-significant-connection presence option.

Do travel days count as Puerto Rico days?

A day spent partly in Puerto Rico counts as a Puerto Rico day, including a day you fly between Puerto Rico and the mainland. Short airport layovers in the U.S. of under 24 hours while traveling between two non-U.S. places do not count as U.S. days.

When can my first year count as a resident year?

In the year you move, the tax home and closer connection tests are treated as met if you were not a resident in the prior three years, have no tax home or closer connection elsewhere for the last 183 days of the year, and remain a bona fide resident for the next three years. Moving by around mid-year usually makes that year eligible; confirm with a CPA.

What is Form 8898 and do I need to file it?

Form 8898 reports that you became or stopped being a bona fide resident of a U.S. territory. It is required when your worldwide gross income for that year is more than $75,000, and missing it can cost a $1,000 penalty unless you show reasonable cause.

Does Puerto Rico check residency too?

Yes. Your decree requires that you be a bona fide resident, and you file annual reports with DDEC confirming you meet the decree's conditions. Puerto Rico and the IRS look at overlapping facts, so a consistent record of where you live, work and spend your days serves both.

Sources and further reading

IRS practice unit: bona fide residency in U.S. territories, Internal Revenue Service, covering the presence, tax home and closer connection tests and the year-of-move rules under section 937.
IRC 937(a) residency, Internal Revenue Service.
IRS Form 8898: statement for individuals who begin or end bona fide residence in a U.S. territory, Taxes for Expats.
Informative Bulletin DDEC No. 2026-004, Puerto Rico Department of Economic Development and Commerce, on Act 38-2026 filing rules and residence title.
Act 60 tax compliance and IRS scrutiny, Holland & Knight, June 2026.

This article is general information, not legal or tax advice. Bona fide residency is decided on your individual facts each year, and the regulations, IRS enforcement priorities and DDEC requirements change. Work with a Puerto Rico tax attorney and a CPA experienced in section 933 and 937 before relying on any part of this checklist. Information about the Cayey estate is provided by the owner and should be independently verified.

Act 60 Bona Fide Residency Checklist: The 183-Day, Tax Home and Closer Connection Tests