Does Puerto Rico Have Property Taxes?
Gain insight into Puerto Rico's property tax system, which relies on a distinct assessment process and offers significant exemptions for homeowners.
Yes, Puerto Rico has a property tax system. This tax is a primary source of funding for the island’s 78 municipalities, supporting local services and infrastructure. The system is distinct from those in the mainland United States, featuring its own set of rules for assessment, rates, and collection.
Understanding the Property Tax Framework
The government agency responsible for the administration, assessment, and collection of property taxes is the Municipal Revenue Collection Center, known as CRIM (Centro de Recaudación de Ingresos Municipales). CRIM oversees the entire property tax process for all municipalities across the island.
The tax applies to two distinct categories of property. The first is real property, which encompasses land and any permanent structures built on it, such as homes and commercial buildings. The second category is personal property, which includes tangible assets owned by a business.
How Property Taxes Are Calculated
The calculation of property tax in Puerto Rico involves two main components: the property’s assessed value and the applicable tax rate. A unique feature of the system is that the assessed value is not based on the current market price of the property. Instead, taxes are levied on the property’s assessed value as of 1957.
This 1957 valuation is a hypothetical fair market value and generally represents a fraction of a property’s modern cost or market price. For properties built after 1957, an assessment is made to determine what its value would have been in that year. While property owners are required to notify CRIM of significant improvements that increase a property’s value, widespread reassessments have not occurred in decades, keeping the taxable base low for many properties.
The tax rate itself is composed of two parts. A base rate is set by the Commonwealth of Puerto Rico, and an additional rate is established by each individual municipality. The combined rates generally range from just over 8% to nearly 12%, but this percentage is applied to the much lower 1957 assessed value, not the current market value.
Common Property Tax Exemptions
Several exemptions are available that can reduce or eliminate a property owner’s tax liability. The most widely used is the primary residence exemption. This provision exempts the first $15,000 of the assessed value for any property that serves as the owner’s principal home. Given the 1957 valuation standard, this exemption is substantial and can completely offset the tax bill for many homeowners.
Veterans may be eligible for property tax exemptions, as are individuals over the age of 65 who meet certain income limitations. Properties used for specific agricultural purposes may also qualify for tax relief, encouraging farming and land cultivation.
Further tax benefits are available through various economic incentive programs. For instance, new construction may be fully or partially exempt from property taxes for a set number of years to stimulate development. Additionally, individuals and businesses that relocate to Puerto Rico under incentive laws like Act 60 may also receive favorable property tax treatment.
The Property Tax Payment Process
The property tax bill is issued by CRIM annually. Property owners have the option to pay the total amount in two semi-annual installments. The first installment is typically due in July, and the second is due in January.
CRIM provides several methods for payment. The most common method is through the CRIM online portal, which allows for electronic payments. Owners can also choose to mail their payment directly to CRIM’s processing center, or pay in person at designated collection centers located throughout Puerto Rico.