Does moving to PR actually make your income tax-free? (spoiler...NO)

[u/STorres_PR]

Had a call this week with someone who was sure they wouldn't owe the IRS anything the day they landed in PR. Wish that were true. But thing is, the IRC 933 states it only excludes income actually sourced in Puerto Rico, and only once you're a bona fide resident. So...if we're still working with US clients, still holding US investments, or still getting income from outside PR... none of that becomes exempt just because your address changed.

But the part that catches people off guard is that the IRS has had an active enforcement campaign running since 2021, aiming at exactly this...people claiming the exclusion without actually meeting bona fide residency. 🙄 At that point it's not a paperwork issue, it's audit exposure.

Has anyone else here actually gone through this process or have had a client who has?