January 12, 2025 — La Fortaleza, San Juan, Puerto Rico —Today, Governor González-Colón has introduced to the Legislature the second phase of her Tax Reform proposal, aimed at delivering significant tax relief for the middle class ahead of the April filing season by reducing their overall tax burden.
“From day one, we made a firm commitment to Puerto Rico: to ensure that work pays, that families can breathe easier, and that the tax system no longer imposes a disproportionate burden on those who comply. Today, thousands of hardworking Puerto Ricans pay some of the highest income tax rates in the United States. It’s not fair. That is why we are transforming our tax system into a simpler, fairer structure that reduces the burden on the middle class and provides greater support to families. This reform is about returning the fruits of hard work to the people, creating more competitive conditions for economic development, and moving forward responsibly,” stated the Governor.
This second phase of the Tax Reform represents a pivotal shift in fiscal policy. It doubles the dependent deduction from $2,500 to $5,000, lowers income tax rates for working middle-class families without eliminating existing benefits, applies the highest tax rate of 33 percent only to incomes exceeding $150,000—affecting less than 0.2 percent of the population, simplifies the tax system by eliminating complex rules to facilitate compliance and reduce administrative costs, and promotes savings in public spending, allowing for tax reductions without negatively impacting the public.
Under this proposal, it is estimated that a single service technician with one dependent earning $23,768 annually currently pays $565 in income taxes and would save $399 under the reform, a married secretary filing separately with three dependents earning $32,139 currently pays $1,023 and would save $505, and a married social worker with one dependent earning $55,370 currently pays $4,161 and would save $1,206.
“With this Tax Reform, working families keep more of their hard-earned money,” the Governor emphasized.
The first phase of the Tax Reform consists of ten laws already enacted, out of the fourteen bills previously submitted by the Governor to the Legislature, which are currently providing tangible benefits to the population.
These include: Act 64-2025, which clarifies and expands tax exemptions for nonprofit organizations, Act 65-2025, which simplifies tax processes within the Department of Treasury and standardizes tax filing deadlines for businesses, Act 66-2025, which extends the income tax exemption on residential rental income; Act 67-2025, which provides tax exemptions for bona fide farmers, Act 72-2025, which simplifies the collection of the Municipal Sales and Use Tax (IVU) through the Department of Treasury’s S.U.R.I. system, and Act 78-2025, which fully exempts prescription medications from the IVU.
Also enacted into law are Act 177-2025, which authorizes the creation of ABLE accounts—tax-advantaged savings accounts for individuals with disabilities, allowing them and their families to save for disability-related expenses without jeopardizing eligibility for essential federal programs, Act 178-2025, which increases the maximum annual deduction for education savings contributions from $500 to $1,000, expanding benefits for families responsibly preparing for future educational expenses, Act 179-2025, which promotes retirement savings by increasing the allowable deduction for traditional IRA contributions to match the federal limit, and Act 180-2025, which provides capital gains tax exemptions from the sale of a taxpayer’s principal residence.
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