What documentation proves bona fide residency in Puerto Rico for federal and local tax purposes?
Executive summary
Becoming and proving bona fide residency in Puerto Rico for tax purposes hinges on satisfying three statutory tests—presence, tax home, and closer connection—and on producing documentary evidence that shows a genuine, primary life and tax center on the island; federal rules and IRS guidance explain which records are most persuasive and require specific filings in certain situations (notably Form 8898) to notify the IRS of a residency change [1] [2] [3] [4]. Puerto Rico tax authorities likewise expect local filings and proof of Puerto Rico tax compliance; Act 60 decree holders and new residents should assemble both U.S. and Puerto‑Rico–focused documentation because residency determinations are litigated and audited using detailed information requests [5] [6].
1. The legal standard: three tests that govern what documentation matters
The federal standard for a bona fide resident of a U.S. possession is set out in the Internal Revenue Code and regulations and is operationalized through three distinct tests—the Presence Test, the Tax Home Test, and the Closer Connection Test—which determine whether an individual is a bona fide resident of Puerto Rico for the tax year in question [1] [6]. Each test translates into different documentary lines of proof: days present in Puerto Rico (calendar records, travel itineraries), where the taxpayer’s economic activity and family are based (employment contracts, business registrations, payroll, property ownership), and where the taxpayer’s closer social and economic ties lie (voter registration, driver’s license, bank accounts, memberships) [1] [7] [8].
2. Presence test evidence: how to show the required days on the island
To satisfy the presence test, the clearest documentary proof is contemporaneous records demonstrating days physically present in Puerto Rico—boarding passes, passport stamps where available, flight itineraries, ferry or vehicle logs, employer attendance records, and calendar entries tied to corroborating receipts or reservations; IRS regulations and guidance stress the presence count as a foundational element of residency [1] [7]. Practitioners also warn that simply claiming “183 days” without corroboration is weak; robust travel records and third‑party evidence carry weight in audits and campaign IDRs launched by the IRS [6] [7].
3. Tax home and economic center: documentation that shows Puerto Rico is where work and business happen
Proving Puerto Rico is the taxpayer’s tax home or principal place of business relies on workplace and income records: employment contracts showing Puerto Rico as the principal place of work, payroll records with Puerto Rico withholding or deposit information, local corporate registrations, invoices paid to Puerto Rico bank accounts, and Puerto Rico tax returns and filings demonstrating local-source income reporting [1] [5] [4]. Legal analyses and advisory firms emphasize that tax home evidence must show the taxpayer’s primary economic activity is on the island rather than merely transient or seasonal presence [9] [6].
4. Closer-connection indicators: the social and civic proof the IRS looks for
The closer‑connection test is inherently factual and the IRS examines indicators such as Puerto Rico driver’s license or ID, voter registration in Puerto Rico, family residence location, lease or deed to a Puerto Rico residence, local utility bills, Puerto Rico bank accounts and credit cards, medical providers, club memberships, and where a taxpayer files income tax returns—these items demonstrate a taxpayer’s greater connection to Puerto Rico than to the U.S. mainland [7] [3] [8]. Advisory sources caution that many of these items can be manipulated, so auditors weigh authenticity and the totality of ties rather than isolated documents [3] [6].
5. Required filings and audit realities: Form 8898 and the IRS campaign approach
When a taxpayer begins or ends bona fide residency in a U.S. possession and meets specified income thresholds or filing positions, IRS Form 8898 (Statement for Individuals Who Begin or End Bona Fide Residence in a U.S. Possession) is required; failure to file when required can invite greater scrutiny [3] [4]. The IRS has run targeted “campaign” audits of Act 22/Act 60 migrants and typically opens audits with extensive information document requests focused on residency, meaning taxpayers should retain the underlying primary documents—bank records, leases, tickets, utility bills, contracts and local tax filings—to defend their positions [6].
6. Puerto Rico-specific evidence and local tax compliance
For local tax purposes, Puerto Rico authorities and incentives programs (e.g., Act 60) require registration, local tax returns, and in many cases decree documentation to claim incentives; being “bona fide” for federal exclusion and qualifying for Puerto Rico benefits are intertwined, so maintaining Puerto Rico tax compliance and formal local records (Hacienda filings, decree letters, local payroll registrations) is essential documentation in support of residency claims [5] [9].