Today is the deadline for filing federal income taxes in the United States. Residents of Puerto Rico don’t have to file tax returns or pay income taxes on money earned in Puerto Rico.
If you live in Puerto Rico and have money from any source outside of Puerto Rico, you must file. You may also have to file if you are self-employed.
If you work for the U.S. government, you will usually have to file a federal income tax return. A special form will help you determine whether you must file or not.
So most people in Puerto Rico don’t have to file a federal income tax return.
When Puerto Rico becomes a state, residents will have to file federal income tax returns.
That’s not quite the same as saying that residents will have to pay federal income tax.
Filing federal tax returns could pay off
44.4% of Americans don’t pay any income tax, even though they file a tax return. If they have paid taxes during the year, they get a check from the government refunding those taxes.
What’s more, if they receive a tax credit such as the Child Tax Credit or the Earned Income Tax Credit, they get additional money as a refund — more than they paid.
Puerto Rico residents can receive a Child Tax Credit for their third child and every child thereafter, but people living in states get that credit for every child.
Why do people pay no income tax? Usually, because they don’t earn enough to pay income tax. In Puerto Rico, the average income is lower than in any of the states. Therefore, an even larger proportion of Puerto Rico residents could expect to get a refund instead of paying taxes.
Almost everyone in the United States pays more in payroll taxes than in income tax. Payroll taxes cover Social Security and similar costs. Only 15.5% of U.S. residents pay no payroll tax and no income tax. Only 20% pay more income tax than payroll tax.
Workers in Puerto Rico pay payroll tax just as those in the states do. However, they receive less in benefits from those taxes.
Once Puerto Rico is a state, workers there will get equal treatment in the benefits covered by payroll taxes.
In short, Puerto Rico’s workers will generally be better off in terms of taxes once Puerto Rico becomes a state.