What’s New for Puerto Rico Residents in 2025
- Lowered threshold for Additional Child Tax Credit (ACTC): Bona fide residents of Puerto Rico now need one qualifying child (instead of three) to claim the ACTC, if they have Social Security, Medicare taxes withheld or pay self-employment tax. (irs.gov)
- New benefit amounts: For tax year 2025, the Child Tax Credit (CTC) is $2,200 per qualifying child, and up to $1,700 is refundable through the ACTC. (irs.gov)
Who Qualifies
To be eligible for these credits in Puerto Rico, you must:
- Be a bona fide resident of Puerto Rico during the tax year. (irs.gov)
- Have one or more qualifying children under age 17 with a valid Social Security Number. (irs.gov)
- Have Social Security and/or Medicare tax withheld, or pay self-employment tax. (irs.gov)
Income Limits and Phaseouts
- Married filing jointly: Modified Adjusted Gross Income (MAGI) must not exceed $400,000. Otherwise, the credit phases out. (irs.gov)
- Other filing statuses: MAGI cap is $200,000. (irs.gov)
Interaction with U.S. Tax Obligation
- Puerto Rico-source income is exempt from U.S. federal income tax for bona fide residents (except wages earned from the U.S. government). (irs.gov)
- If you must report U.S.-source or other non-Puerto Rico income, use Form 1040 or 1040-SR, and the CTC/ACTC is claimed using Schedule 8812. (irs.gov)
Practical Examples
| Example | Situation | Outcome |
|---|---|---|
| Ana, one qualifying child, wages with SS/Medicare withheld, MAGI $35,000 | Meets all requirements | She can claim $2,200 CTC + refundable $1,700 ACTC |
| Luis and Maria, no children but MAGI $50,000 | No qualifying children | Neither credit applies |
| Pedro, two children, but no payroll deductions and only self-employment income | Pays self-employment tax | Qualified for credits under ACTC |
Actionable Advice
- Documentation: Ensure your children have valid SSNs; keep pay stubs or records showing taxes withheld or self-employment tax paid.
- Residency proof: Maintain records — deeds, rentals, business ties — showing bona fide residency in Puerto Rico.
- Accurate income reporting: Include all income needed for MAGI calculations, whether or not it’s exempt under IRC §933. Form 1116 may be required when claiming foreign tax credits for U.S. taxed non-Puerto Rico income. (irs.gov)
- Seek professional advice: Especially to prepare for 2026, when further changes may affect thresholds or eligibility.
This shift makes federal benefits easier to claim for many Puerto Rican families in 2025, lowering the requirement to just one qualifying child. Make sure your status, documentation, and filings neatly align by deadline.