If you're running a short-term rental in Puerto Rico—or thinking about investing in one—you've probably heard about Act 60. It’s a set of tax incentives designed to attract entrepreneurs, investors, and property owners to the island. But what does it mean for you as a rental owner?

Here’s the bottom line: Act 60 can drastically reduce your tax burden and help you keep more of your rental income. In fact, with tax savings, your net profits could increase by as much as 96%. That’s a huge opportunity if you play your cards right. Let’s break it down step by step.

What Is Act 60 and Why Does It Matter for Rental Owners?

Act 60 is a law that offers tax benefits to individuals and businesses that relocate to Puerto Rico and invest in the local economy. It’s part of Puerto Rico’s plan to boost its economy by attracting foreign investment. One of the most attractive features for rental property owners is the 4% fixed income tax rate.

Compare that to the mainland U.S., where combined federal and state income taxes can easily hit 30-40%. With Act 60, instead of giving a big chunk of your rental income to the government, you get to keep most of it. This can have a major impact on your profits, especially if your property is already bringing in steady bookings from platforms like Airbnb and VRBO.

Let’s say your rental earns $100,000 in gross income. After expenses, you’re left with $60,000 in profit. On the mainland, you might pay up to $24,000 in taxes, leaving you with $36,000. Under Act 60, your tax would only be around $2,400—leaving you with $57,600. That’s a difference of more than $20,000!

Other Tax Benefits Under Act 60

It’s not just income taxes that get reduced. Act 60 also offers capital gains tax incentives, which is great news if you plan to hold onto your property for several years and sell it later. Depending on how long you’ve lived in Puerto Rico and how your business is structured, you may qualify for reduced or waived capital gains taxes.

This can make Puerto Rico a prime spot not just for operating short-term rentals but also for long-term real estate investments.

Who Qualifies for Act 60?

To take advantage of Act 60, you’ll need to meet some residency and business criteria. The most important rule is that you must establish Puerto Rico as your primary residence. This means spending at least 183 days per year on the island and making it clear that Puerto Rico is your tax home.

Beyond residency, you'll also need to apply for an Act 60 decree, which outlines the specific benefits you’ll receive. Many rental property owners qualify through local business activities like short-term rental management. However, you'll need to stay compliant with Puerto Rico’s hospitality tax requirements and other regulations.

Understanding the 9% Hospitality Tax

If you’re renting out your property on platforms like Airbnb, you’ve probably noticed that they automatically collect 7% of the required 9% hospitality tax from your guests. What many owners don’t realize is that you’re still responsible for the remaining 2%.

This tax is based on gross revenue, and failing to pay it on time can lead to hefty fines and penalties. For example, if your property earns $10,000 in bookings for a month, the 2% tax is $200. If you forget to pay it, penalties and interest can quickly add up.

Act 60 doesn’t exempt you from these taxes, but it does ensure that your overall income tax burden is much lower. Staying compliant with these filings is crucial to maintaining your tax benefits.

How a Property Management Company Can Help

Managing a rental property under Act 60 involves more than just collecting bookings. You’ll need to stay on top of tax filings, guest turnover, and property maintenance. That’s where a property management company like Tropical Stay Management (TSM) can make life easier.

We handle the details, so you don’t have to worry about missing a tax deadline or dealing with complex regulations. Our team takes care of:

• Monthly hospitality tax filings to avoid penalties.

• Maintenance and repairs to keep your property guest-ready.

• Marketing strategies to boost your occupancy rates year-round.

We also partner with experts who understand Act 60, so we can help you maximize your benefits while staying fully compliant.

Is Act 60 Right for You?

If you already own or plan to invest in a short-term rental in Puerto Rico, Act 60 can be a game-changer. The tax savings alone can dramatically increase your net income, making your property far more profitable. However, it’s important to understand the requirements and stay on top of your filings.

If you're not sure where to start, Tropical Stay Management is here to help. From handling guest services to navigating Puerto Rico’s tax system, we make rental ownership hassle-free and profitable.

Final Thoughts

Act 60 is a golden opportunity for rental property owners in Puerto Rico. By reducing your income tax rate to just 4%, you can boost your rental income and reinvest in your property. Whether you’re a seasoned investor or just starting out, this program can help you unlock the full potential of your rental business.

Ready to learn more? Contact Tropical Stay Management today and find out how we can help you maximize your rental income under Act 60.