Moving to the island won’t kill all taxes: U.S. citizens still have to pay federal taxes on dividend or interest income from stateside companies. But the savings can be extraordinary, especially given the effects of compounding, says Alex Daley, chief technology investment strategist at Casey Research, a firm that publishes reports for investors. Late last year, Daley moved from Stowe, Vermont, to Palmas del Mar, about 45 minutes from San Juan.
Tax Savings
Say you put $100,000 in a 5 percent certificate of deposit that compounds annually and reinvest the proceeds every year. If you lived in Puerto Rico, you’d earn $165,000 in interest over two decades, Daley calculates. If you lived in California, your state and federal taxes could reduce that to as little as $64,000.
Paulson, who made $15 billion for himself and his investors betting against U.S. mortgages during the financial crisis, helped start the wave of transplants last year, when he considered moving to the island. Paulson, 58, cited excessive media attention as his reason for staying put in the States. The press reports had an unintended consequence, though: Word quickly spread to other wealthy individuals that Puerto Rico wanted them.
Like the tax refugee at La Factoria, who asked that I not divulge his identity because his boss wouldn’t want to see his name in print, almost all say the incentive to move to a cash- strapped Caribbean island plagued by violent crime is simple: Pay Uncle Sam less.
Educating Expats
Robb Rill, 43, managing director of private-equity firm Strategic Group PR, relocated with his wife to Puerto Rico from Florida in February 2013. He started the 20/22 Act Society, named for the tax laws designed to encourage people and businesses to set up shop here, to help educate fellow expatriates and serve as a networking group.
“I’m talking to people every day who are moving here, and their No. 1 motivation is taxes,” he says.
Margaret Peña Juvelier, who grew up in New York City, the daughter of Puerto Rican immigrants, moved to San Juan in 2012 to open a Sotheby’s real estate office. Driving around, she shows me a few of San Juan’s top apartments. We cross a small bridge to a six-block area surrounded by water.
“This is Waco,” Juvelier says, pointing out the window.