Topic no. 902, Credits and deductions for taxpayers with Puerto Rican source income exempt from U.S. tax

If you're a bona fide resident of Puerto Rico, you'll be able to exclude income from Puerto Rican sources on your U.S. income tax return. However, this exclusion from U.S. income taxation doesn't apply to wages you receive for services performed as an employee of the United States Government (or one of its agencies), including members of the U.S. Armed Forces.

If you're a bona fide resident of Puerto Rico and file a U.S. income tax return, then you can claim deductions and credits that apply to income reported on your U.S. income tax return. You can't claim deductions and credits that apply to the Puerto Rican source income that you excluded on your U.S. income tax return.

Child Tax Credit

Residents of Puerto Rico with a qualifying child can qualify for the child tax credit (CTC) and the additional child tax credit (ACTC). For tax year 2025, the initial amount of the CTC is $2,200 for each qualifying child. The unused portion of the CTC that can be claimed as a refundable credit (ACTC) for 2025 is $1,700 for each qualifying child.

Residents of Puerto Rico must file a federal tax return with the IRS to claim the ACTC. The credit can be claimed on:

• Formulario 1040-SS (SP), Declaración de Impuestos Federal sobre el Trabajo por Cuenta Propia (Incluyendo el Crédito Tributario Adicional por Hijos para Residentes Bona Fide de Puerto Rico) (in Spanish),
• Form 1040-SS, U.S. Self-Employment Tax Return (Including the Additional Child Tax Credit for Bona Fide Residents of Puerto Rico),
• Form 1040, U.S. Individual Income Tax Return or Form 1040-SR, U.S. Tax Return for Seniors.

Form 1040-SS (SP) is a Spanish-language form. Form 1040 and Form 1040-SR have Spanish-language versions.

Foreign tax credit

If you must report income from Puerto Rican sources on your U.S. income tax return, then you can claim a foreign tax credit for income taxes paid to Puerto Rico on that income. To calculate your foreign tax credit, you must reduce the income taxes paid to Puerto Rico by the amount of income taxes allocable to excluded Puerto Rican source income. When claiming a foreign tax credit, you must complete Form 1116, Foreign Tax Credit. See Topic no. 856 for more information about the foreign tax credit.

For more information about how to allocate deductions and credits with respect to excluded income as well as how to determine if you're a bona fide resident, refer to Topic no. 901, Publication 570, and Publication 1321 PDF PDF.