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Today, I'm going to round out my three-part tax series here by presenting to you the case for moving to Puerto Rico, or as of course the Puerto Ricans would say, Puerto Rico, the case for moving to Puerto Rico. And I want to do two things in today's show. Number one, I'm going to expose many listeners to a brand new idea of something that you've never thought of.

And this very well could be a magic key that will save you hundreds of thousands of perhaps millions of dollars of tax legally. And I am not kidding with that number. This is a powerful tool. But number two, I also hope to bring a little bit more clarity to those listeners who have heard of the idea of moving to Puerto Rico, but who have perhaps received some erroneous information.

So let me start by explaining the problem. For US citizens or US persons, defined again as a US citizen or a green card holder, for US persons, the US tax net is inescapable. It's very frustrating because no matter where you go in the world, the US federal government and the IRS will follow you.

They will follow you and they will tax you. And what's very difficult about this is as the world's police power, the US government has powers that simply do not exist. They're not held by other nations. For example, the country of Eritrea is the only other country in the world that I'm aware of that has what's called citizenship-based taxation, which means they tax all of their citizens no matter where in the world they live.

They're doing it to pay for a civil war that they either had or having. And I think the tax rate that they impose on Eritrean citizens is about 2%. I don't know any Eritrean citizens, but I doubt that there is a single Eritrean citizen anywhere in the world that is not living in Eritrea that is particularly worried about the tax being imposed upon them by the nation of Eritrea.

You could be an Eritrean citizen living in Canada or in the United States or Germany, living your life, and you could pretty much safely ignore the Eritrean government for your entire lifetime and never even care what they have to say because they are impotent. They are poor. The government doesn't have the money.

And so there's no fear of the sanction unless you're actually going to go to Eritrea and in some way they're going to prove their case. But how do they prove what money you've made, et cetera? If you compare that with the problem faced by US citizens, you can see the stark contrast.

Unlike the Eritrean government, the US government has the money to follow you all around the world. They have global police spy powers where they understand and try to find out basically where every person in the world is. The US government reads every email that's sent by anybody in the world and catalogs it.

The US government monitors every phone call that they can keep their hands on. The US government employs these spy powers on a global basis, trying to basically track anyone anywhere in the world. And so if you're trying to hide from the US government, it's not particularly easy. Now, what's even worse is due to the massive power, economic power of the United States, as the US government has imposed more and more laws basically on the world, the whole world just steps up and, as the saying goes, step to fetch it.

They just say, "Okay, yes, we'll do it." The most onerous of these are the Foreign Account Tax Compliance Act passed in about 2010 that requires any bank anywhere in the world that does business with US persons, people who have indicia of US personhood, US citizenship, etc., to report all of the account information for those persons to the US government.

Now, if the Eritrean government tried to impose that on a Swiss bank, for example, or a Cayman Bank, if the Eritrean government passed a law, the Swiss bankers would just laugh. They would say, "You can't tell us what to do with Eritrean citizens." But the US government imposed such onerous sanctions on banking institutions that don't certify their compliance with FATCA that basically all of these giant institutions face the risk of, I think it's a 40% penalty tax or 30% to 50%, something in that range, of any assets that they have in the United States.

So if you're a large German bank or you're a large Panamanian bank or you're a large Cayman Bank, etc., it's a massive risk to you not to certify your compliance with the Foreign Account Tax Compliance Act. So when this law was passed, it imposed literally tens of millions of dollars of costs on global banks to be able to certify their compliance.

But because those global banks wanted to not face the penalties of business with the United States, of losing their assets in the United States, facing those harsh sanctions by the US government, because those banks didn't want to face that, they put themselves in a situation where they said, "Okay, we'll do it.

We'll pay the tens of millions of dollars to bring ourselves into compliance with FATCA." Now, not all did. The solution that many banks chose was to not do business with US persons. And so, for example, if you have a passport that lists on it the fact that you were born in the United States, in a city in the United States, and if you have an offshore bank account, and if your bank chose to just simply say, "We're going to not do business with US persons," then you probably got a letter from the bank saying, "Thanks for the business, but we're terminating your account." And this happened to many US citizens living all around the world, even citizens who hadn't been back in the United States in decades.

Maybe somebody was living in Switzerland. Well, for a Swiss citizen living in Switzerland, a Swiss bank account is just as normal as it is for a US citizen to have a Bank of America account. It's not a fancy, somehow super sexy, secret offshore bank account. It's just the bank, the bank account they do business with.

And so, this affected many US citizens living in Switzerland, banking at a Swiss bank, because now the Swiss bank dropped all US citizens because that person had retained their citizenship. Now, there was a modest tick up of US citizens renouncing their citizenship, etc. And I think that trend will probably continue, especially as FATCA has been more and more integrated.

And now, of course, many of the European countries are coming together. And after seeing the US impose their spy empire on the world, and after seeing the whole world step up and say, "Yes, master," to the US government, then they put themselves in a position where they could, where everyone says, "Yeah, we'll just do the same thing." So, you have the CRS standards coming out through Europe, etc., everyone following suit.

So, the point of that discussion is just simply to say that unlike the fairly empty threats that the Eritrean government might make against its citizens, the threats that the US government makes against its citizens are not empty. They're backed up with massive military power spread across the globe. They're backed up with massive informational powers, etc.

Now, could you evade that tax net? Could you as a US citizen leave the United States and live your entire life without ever actually facing any of the legal risks without the US president ordering a predator drone to drop a missile on your head? Yeah, you probably could. I don't know what the percentages are, but most taxing authorities gain most of their power through their bluster.

That's why at this time of year, I haven't looked for them, but you will see at this time in March and April, every single year, that is when the IRS will start releasing their press releases of the high-profile tax evaders that they are prosecuting. Most of the enforcement doesn't happen through actual enforcement.

It happens through intimidation, through threats that keeps people saying, "You know what? I'm not going to tangle with the US government." And it works. Even if I were not guided by a desire to decide based upon what's ethically and morally right or wrong, I am swayed by the power and the bluster and the threats of the US government.

I don't particularly want to spend time in prison. Ever since the US government changed tax evasion to become a felony offense, which in and of itself was a scandal that nobody paid attention to, I don't have any desire to spend time in prison and I don't want a predator drone dropping a missile on my house.

So not that that's ever happened yet that we know of, of course, you know how these things go. Point is, I am intimidated by that. And so this is the problem I think that many US citizens face. Well, I don't really love doing business in the United States. I don't love this heavy-handed regulatory environment.

I don't love these heavy taxes. I look forward at the future and I don't like the direction that the taxation can go. I don't like where the fiscal situation is. So how do I escape? Well, for everybody else in the world except Eritrean and US citizens, you can leave.

Even the USSR used to tax people on their citizenship, but Russia doesn't anymore. If you don't like Russian taxation, you can just leave Russia. You know, the other nations, every other nation except the United States has scrapped citizenship-based taxation, the ones that used to have it, but the United States has not, and as best I can guess, will not, because the US uniquely has this giant police state that can follow US citizens around the world.

So that was what I laid out in yesterday's show. And forgive me if I get too political. I was really, I realized after I recorded the previous show that I got too, I didn't stay as close to the facts as I could. And I thought about re-recording it, but if you have to listen past that stuff to get to the meat of it, fine.

It just, I find it frustrating. I find it wrong. And I guess it's hard for me to filter that as you can tell, I can't talk on a microphone for hours and filter all that stuff out. So now the problem is what do US citizens do? Well, US citizens can, of course, renounce their citizenship and go elsewhere.

So you can always just simply, you can qualify for the foreign income exclusions I mentioned yesterday. But if you really want out of the system, you can formally renounce the system, the citizenship. It'll cost you several thousand dollars at least to renounce. If you have more than $2 million of net worth, you'll pay significant exit taxes, but you can in time renounce.

In order to successfully renounce, you have to have your, you have to certify your tax compliance, have all your paperwork in order, etc. But you can renounce. But that's really, really hard for US citizens, because most Americans appreciate at least to some degree, the country of their birth. Most Americans, no matter how long the list of complaints, at least if when push comes to shove, actually do appreciate a lot of things about the United States of America.

I'm a pretty decent example of this. I have a long litany of complaints. I have a long list of frustrations, as I'm sure every person in every country in the world does. But when you consider the world and you look out around the world and you say, well, where is it better?

It's hard to find any one particular place where it's better. If I could identify one country where I said, in every measure, this country is better, as I subjectively define better, better than the United States, I would go there. I really would. The problem is, where's that country? What country is it?

I can on any individual factor, I can find other countries that will be superior on that one individual factor. But when you put together the comprehensive list of factors, it's very hard to find a country that many Americans would say is better for all of the problems in the United States.

Even if you just go through the list of the big Western countries, especially the big English-speaking countries that most Americans are familiar with. Canada? You're going to go to Canada? I mean, the Canadian government has increasingly little respect for the freedom of speech. Just think, the court case last month in British Columbia, where the court has ordered a 14-year-old girl to receive testosterone injections to treat her gender dysphoria without parental consent.

And the court has mandated that if the father of that girl who rejects that particular treatment as being right for his daughter, if the father of that girl refers to his daughter directly as a female, or if the father of that daughter refers to his daughter as a biological female, as a female, to anybody, even in casual conversation, that father can be held in contempt of court.

That's one of the most appalling things I can think of. There's not a chance in the world I want to go to Canada if that's the direction that the Canadian legal system is going. You brought in all the other issues, euthanasia, et cetera, it just goes on. Britain, United Kingdom, I like the UK, but the UK has become a farce.

The surveillance state in London, not only do they ban guns, they ban knives, they ban screwdrivers now. Freedom of speech, gone. It's laughable to think that there's any freedom in Britain. The government can't even extricate itself from the European Union after the first vote, basically, that the UK citizenry ever had on their membership in the European Union, and even still that vote can't be followed.

Australia, Australia is a neat place, but they recently passed laws banning encryption. I think that's basically a kind of a flag in the same way that the five nations work together to see where can this work. Australia's banned encryption. Not a chance in the world I would want to put in my lot with a government that thinks that they're going to ban encryption.

New Zealand, after the recent killing in New Zealand, the New Zealand government is arresting people who are committing the crime, the newly established crime of possessing the shooter's manifesto, which ironically proves the killer's argument written in that manifesto. Outside of the English-speaking world, where are you going to go?

Germany, economic powerhouse of Europe, no homeschooling. Brazil, economic powerhouse of South America, no privacy. So you can go to almost any country on any individual issue, you can say, "Here's where this country shines," but on the whole, it's hard to do that. So I think there's a very strong argument to be made in terms of the PT theory, the PT philosophy as being the best solution for freedom.

But it's very hard for US Americans to come to the point where they're ready to actually renounce US citizenship. Now, there are a lot of misconceptions about that. Just because you renounce citizenship doesn't mean you can't come back to the United States. You can come back and you can visit.

You just can't live there. But most of us appreciate a lot of things about the US government. And I think even those of us like me who find a lot to be pessimistic about, I also sometimes have glimmers of hope. And I think, well, maybe this could change. Maybe federalism could work.

Maybe the 10th Amendment could be a successful solution. Maybe although the public show is absurd, maybe at the core, there are changes happening that are good. And so you kind of don't want to just turn it off. And then ultimately, there are enough basic things that you can do in the US that for all of my complaints about the high taxes, as long as you are not earning a high income in the United States, you can structure your affairs to pay a modest tax rate.

It's not 10%, a flat 10%, which I would love, but it can be modest. As long as you're not an income earner, you can structure things decently enough, even if you have millions of dollars of income. But the problem is, what does a big earner do to save taxes, who is not willing to renounce citizenship and who is determined to stay legal?

What can that person do? And that's where the foreign earned income exclusion falls short. If you have a hundred, a couple hundred thousand dollars of income, the foreign earned income exclusion is a powerful tool. The ability to defer $105,000 for an individual, $210,000-ish for a couple, if they're both working in a business, that's really powerful.

To set it up in a foreign corporation, thus eliminating your employment taxes, that's really powerful. That's a savings of, let's call it 30 grand on each $100,000. So that couple can potentially save $60,000. The problem with the foreign earned income exclusion is, what if you make more? Because the way that exclusion works is, it will exclude your first $100,000 of income from taxation.

But the next $100,000 faces the taxes exactly the same as if you were in the United States. And the next $100,000 does not start off at the zero tax bracket. It starts off at the $100,000 tax bracket. So you basically automatically go into a much higher bracket and it just goes up from there.

So where does a million dollar income earner go in order to shelter that money if they're not willing to renounce citizenship? About the only solution is Puerto Rico. Let me explain why. Puerto Rico lives in an interesting status, kind of a weird in-between status. Puerto Rico is not a state of the United States.

It's not the 51st state, although there is a very active political movement in Puerto Rico advocating for their inclusion as the 51st state. Neither is Puerto Rico an independent country, although there is a modest political movement in Puerto Rico that would advocate for Puerto Rico to assert its independence from the United States.

And this has been a contentious issue in Puerto Rico for at least a century, where a very... I think there've been four plebiscites, people saying, letting the people vote, what do you want? Do you want to be a state? Do you want to be in a country? What do you want?

And it goes back and forth. But Puerto Rico continues as a commonwealth of the United States. And this commonwealth designation is unique because the residents of Puerto Rico are, by law, US citizens. Everybody who is born in Puerto Rico is a US citizen. They travel on US passports. They are US citizens by birth.

But as a resident of Puerto Rico, they are subject to Puerto Rican tax laws, not to US federal tax laws, as long as they're not doing business in the US and engaging activities that bring them subject to US tax laws. And this is really interesting, especially in light of some of the recent movements in Puerto Rico.

Now, in general, Puerto Rico has very high taxes. And in general, historically, there's been zero reason why anybody would want to go from the United States to Puerto Rico with a goal of saving on taxes. But a number of years ago, Puerto Rico passed a couple of interesting new laws.

There are a series of them, but the most well-known and most important for our discussions are referred to as Act 20 and Act 22. I am not going to go into the details of Act 20 and Act 22, nor am I going to go through all of the specifics of how to qualify and things like that, because it's just not well-suited to an audio delivery and because there's a decent chance it will change.

The requirements have changed. I'm going to lay this out for you in very big picture so that you're aware of the opportunity, so that you can research it to see where it can work for you. And I'm also going to show you who it doesn't work for. But a number of years ago, when Puerto Rico established these new laws, they created Act 20 and Act 22.

And basically what Puerto Rico said is, if you will come to Puerto Rico and start a new business that qualifies under what is called Act 20, Puerto Rico will allow you in your Puerto Rican company to pay a tax rate of a maximum of 4% on your corporate profits.

Again, if you will start a business that is eligible for certification as an Act 20 business, and there are a variety of types of businesses that are eligible, many things can fit, but not all businesses. But if you will go to Puerto Rico, start a company in Puerto Rico that is eligible for Act 20, Puerto Rico will charge you a maximum corporate tax rate of 4%.

If you contrast that with the 21% corporate tax rate in the United States, and that of course was recently lowered by the Tax Cut and Jobs Act, you can see the opportunity for substantial savings. And the neat thing is, Puerto Rico is very open to US citizens. In addition, there's a second part of it, Act 22, where for eligible individuals who are new residents of Puerto Rico, if you will physically move to Puerto Rico, buy a home in Puerto Rico and live there, maintaining your tax residency in Puerto Rico, which means that you have to physically be present in the island for at least 183 days per 365-day calendar year.

If you will do that, then you can qualify for a 0% capital gains tax rate on your profits and your gains that are sourced from Puerto Rico. The opportunity here is, if you put these two things together, you have an incredible money savings opportunity. Let's say that you move to Puerto Rico and you start a Puerto Rican company that is eligible for Act 20 status, certified by the government, you get the contract from the government saying this is an Act 20 company, and you live in Puerto Rico.

That company could have a million dollars of profit, and you would pay only 4% of that profit. You would pay 0% personally when you take that income. This is a tremendous opportunity. There are actually some really interesting ways that the Act 22 contract can work, especially for people like investors.

The key is, it has to be capital gains that are sourced during your time in Puerto Rico. The key is, it has to be capital gains that are sourced during your time in Puerto Rico. For example, there are a number of interesting laws, but you cannot be a Florida resident and have a $100,000 basis in an investment that has grown to be $1 million and then move to Puerto Rico, live there for two days, and then sell the investment, take that million dollars tax-free because you were an Act 22 qualified investor.

You can't do that. The clock starts ticking when you move to Puerto Rico. Now, there is an interesting thing for long-term residency, where even if you did move to Puerto Rico and you stayed there as an Act 22 resident for a very long time, it's possible you can save some taxes on your prior capital gains.

But the biggest opportunity is if you move to Puerto Rico and then create capital gains there. So the best example of this, what's happening in Puerto Rico right now, is many members of the cryptocurrency investor and speculation community are moving to Puerto Rico. The idea is, if you are investing in Bitcoin, and it's your opinion that Bitcoin is going to go to $1 million per Bitcoin, and it's going to happen in the next few years, but today it's...

I can't remember what it is today. It's $20,000 per Bitcoin. I can't remember the number right now. If you were going to go from $20,000 to $1 million, and you've got thousands of Bitcoins, you can see how valuable it would be if you were a Puerto Rican resident and all of that capital gain were excluded from taxation as a Puerto Rican resident.

So for those people who are very bullish on cryptocurrency and who are US citizens, it's hard to find a better case for you than moving to Puerto Rico in terms of sheltering your capital gains. Now, of course, as a US citizen, you're limited on some of the ICOs that you can participate in.

So you might still want to choose or consider expatriating, renouncing US citizenship and moving abroad so that you can invest in some ICOs that are restricted for US citizens. But if you expect to have a lot of capital gains income, Puerto Rico is a really, really compelling solution for you.

Likewise, if you're going to start a business, Puerto Rico is a really, really compelling solution for you, especially those of you who are related to finance. One of the big things that's happening in Puerto Rico is there's a couple other act, I can't remember if it's Act 273 or something like that, where you can charter a bank in Puerto Rico.

And there's some interesting ways that you can use some of these company charters being in Puerto Rico and qualify for an Act 20 business. Now, when this act was first established, in order to qualify for an Act 20 business, you had to hire a minimum of five employees there in Puerto Rico, because the whole goal of these tax incentives is that you are creating jobs and bringing wealth and knowledge and training to Puerto Rico.

So you had to create five jobs there in Puerto Rico in order for your company to be certified as an Act 20 company. That has since been removed. I believe today it's one job, if you just have one, if you create one job, and that can be yourself. So you could move to Puerto Rico and live in Puerto Rico, start a Puerto Rican company and qualify as an Act 20, even if it's just you.

So for example, let's say that I were going to start something like a financial planning firm. I would be very seriously pursuing Puerto Rico, especially if I were going to do virtual financial planning, as is an increasingly popular model today. I would very seriously consider moving to Puerto Rico, building my financial planning firm or my insurance agency or my family office or whatever I were building in Puerto Rico.

If I'm going to work with US citizens, I'm going to keep my US citizenship. I just want to work from Puerto Rico and I can work with clients all around the country if I set things up properly and save a huge amount of taxes because I have a maximum of 4% corporate tax rate.

That's the deal. And it's a tremendous deal if it works. Now, there are a lot of wrinkles to this, but I want to get straight to the heart of the matter and say, who does this not work for? Well, it's not the first obvious answer to who does it not work for.

It doesn't work for people who've been living in Puerto Rico, who are from Puerto Rico. One of the things that I don't like about the law that I think is unjust is you have to be a new resident of Puerto Rico in order to qualify for these incentives. So if you were born and raised in Puerto Rico, you can't qualify for the Act 22.

I think you can qualify for the Act 20 if you start an Act 20 business, but you can't qualify for Act 22. I don't like that. I don't like any kind of special treatment of laws. If you're going to have a law, just treat everybody the same in all circumstances.

Don't carve out special loopholes for this person or that person or the other. I understand why they do it, though. I don't like it, though. I think it's unjust. And if the whole thing falls apart, I think that particular issue might be one of the things that winds up causing problems.

Because imagine if you're from Puerto Rico, you're a Puerto Rican citizen, and you are a voter in the politics of Puerto Rico, and all you know about the system is, well, all the other Americans can move to Puerto Rico and they can qualify for this program, but I can't because I'm from Puerto Rico.

It doesn't seem right to me. But let's talk to what's more relevant for our discussion. Who is this helpful for? Well, here are some things that astute listeners would have picked up on, but I want to make very clear to you. Notice I specified corporate tax rates. I didn't specify income, personal income.

And the issue here is if you are an income earner, Puerto Rican income taxes are very, very heavy. There is a progressive tax bracket that kicks in at a very low dollar figure in Puerto Rico. And so what happens is you have to earn income in Puerto Rico and you have to pay Puerto Rican income taxes.

Now, you don't have to pay US federal income taxes if you live in Puerto Rico, but you have to pay Puerto Rican income taxes. That Puerto Rican tax bracket goes up quickly. I think it's anything above about $62,000 is taxed at 33%. And so that tax bracket rises very quickly.

And so the tax burden can be significant for Puerto Rican income taxes. In addition, you face the problem that as a Puerto Rican, you are still required to participate in the employment tax scheme. So if you live in Puerto Rico and you work, you're still going to, and you own your own company, you're still going to be paying out the full 15.3% of your wages, 7.65% employee contribution, 7.65% employer contribution to the Social Security Administration and Medicare and Medicaid because you still are subject to the employment tax scheme.

That's a problem. Now, you can again make that argument that those taxes are less burdensome because in theory, you might get some benefit from someday from those social programs, whereas it's harder to see the direct benefit from the income taxes, but it's still a significant cost. So if you're earning $100,000 per year and you follow the outline of leaving the United States, which means including leaving Puerto Rico, qualifying for the foreign earned income exclusion, setting up your business through an offshore corporation, then you can legally eliminate all taxation, both income taxation and employment taxation on that first $100,000 of income.

For you, $100,000 for your spouse, which is really significant. But if you go to Puerto Rico, you don't eliminate that. You're going to be paying Puerto Rican income taxes on that income, and you're going to be paying employment taxes on that income. And here's where we get into the question of scale.

In order for Puerto Rico to be effective for you, you need to be in a situation where you're going to be making a lot of money and/or you need to be in a situation where you're going to be making a lot of capital gains. Now, the corporate tax rates will work very well for you.

The Act 20 status will work very well for you if you're going to create a very profitable business. Let me just simplistically say a million dollars. If you're going to earn a million dollars from your business, then Puerto Rico could work very, very well because the heavy 15.3% on employment taxes maxes out on the wage base of about $118,000.

And the Puerto Rican taxes max out on the wage base of about $250,000. But the $750,000 from $250,000 to a million could be taxed at only 4%. That's really, really compelling. Because if you were abroad, a US citizen living abroad, you would be taxed a massive rate of tax on that anything from $100,000 to a million.

If you were living in the United States, you would be taxed on a massive amount on zero to a million. So Puerto Rico can save you a huge amount of money if you're a high income earner and a very, very profitable corporation. But it's less workable if you earn a lower amount of money.

So in short, there is a crossover point, but it's hard to define exactly where that crossover point is verbally. But basically think about it this way. If you're earning only a little bit of money, and I don't know exactly what that number is, because it would depend on are you single, married, filing jointly, etc.

What deductions do you have? But let's just say you're earning less than $50,000 per year. You could save some money by going abroad. And possibly, you could possibly save some money by going abroad. You could at least save some money on your taxes by going abroad. But you might or might not save money on your living expenses.

Life in the United States and access to economic opportunity in the United States is very, very high. And so I would be very slow to counsel somebody making $50,000 to move outside of the United States. At least I would be slow to do that unless they were on track to go from 50 to 500 in fairly short order.

If you're making 100, 150, $200,000, maybe 250, 300 in this range of income, this 100 to a couple hundred thousand dollars of income, your most efficient tax moves would be to fully go offshore, to go physically outside of the United States, qualify for the foreign earned income exclusion. But if you're making significantly more than that, let's say 300, 400, 500,000, if you're going up to a situation where you're making a million, a couple million dollars per year, and if you aren't willing to renounce citizenship, Puerto Rico is very much worth your time.

So if you have the kind of business that you can move it and yourself to Puerto Rico, you should seriously investigate Act 20. Your taxes will not be zero. You will be paying significant income taxes on your income that you're earning from the business, and you'll be paying employment taxes.

But for a million dollar earner, employment taxes are the least important tax to worry about. It's the income taxes that kill you if you're earning a million bucks. For a hundred thousand dollar earner, the income taxes are the lesser important taxes to worry about. It's the employment taxes that kill you on $100,000.

And so it's all about a matter of scale of where are you and what works. The other person for whom Puerto Rico is a perfect fit is somebody who can physically relocate to Puerto Rico, qualify under Act 22, and can create massive capital gains and wants those capital gains to be tax free.

Now, before you get excited, be clear, it has to be in Puerto Rico. So this doesn't work for a real estate investor, at least a real estate investor who's not working in Puerto Rico. This doesn't work for somebody who has businesses outside of Puerto Rico. This only works if you can reposition and move yourself to Puerto Rico.

But if you're trading stocks, if you are an investor in stocks, and that's a primary solution for you, if you are doing cryptocurrencies, if you're doing some kind of thing where you're generating capital gains, that Act 22, zero percent capital gains rate on capital gains is very, very attractive.

And you should seriously, seriously consider it. But remember, those people who can do that are those who are already going to have a significant portfolio. If you're starting with $100 in your investment portfolio, you're not going to generate enough capital gains to matter. But if you've got several million dollars already in your investment portfolio, then you can generate enough capital gains that you can get some really significant solutions.

Now remember, you should always counterbalance Puerto Rico with just full renunciation of citizenship because there are many jurisdictions in the world that you can live in that don't tax capital gains at all. So you can go to those jurisdictions live there and pay a zero percent on an unlimited amount of capital gains and not deal with the US government, not deal with the Puerto Rican government.

But this is really, really powerful. And so I want you to just imagine some solutions where how this could work. If you're starting a business, imagine that you're starting a business. Let's use someone like me. Okay, I'm a financial guy. I have there are many businesses that I could start and use this podcast as a really good marketing platform.

I could build an investment firm, I could establish another insurance agency, I could sell insurance policies. I would make a fortune if I took one of those actions. So someone like me, let's say that I, and I may do this someday, I'm just, I'll give you all my ideas, you feel free to do it, I may do it someday, you never know.

At the moment, I don't want to do it. I'd rather keep things simpler, but you never know. Maybe I will decide to do it. So I could move to Puerto Rico, I would start a financial advisory firm, I would start an insurance agency, and I would probably start, depending on how I structured it, I would start something like a small family office, a small multifamily office.

I could live in Puerto Rico. I was as long as I spend 183 days per year there, I could qualify for Act 22, which be helpful for my own personal investment activities as well. And I would start an Act 20 business, I would be paying an income salary to myself, I'd be paying salaries to my staff, but I could recruit fairly easily people to come to Puerto Rico with me.

And I could hire Puerto Rican people to work current residents of Puerto Rico to live there and work there for me. I could build a business, generate several millions of dollars of profit, of corporate profits, all of that profit taxed at a maximum of 4%. Then, let's say I make $5 million in three, four, five, six years, something like that.

I generate $5 million of profit. I decide I no longer want to live in Puerto Rico. I take my $5 million of profit, maximum tax rate paid was 4%. I moved back to the United States, I have generated an absolutely massive financial windfall, which now puts me in a situation where I can redeploy that capital elsewhere and other components of the US economy if I didn't wish to stay in Puerto Rico.

That's the opportunity. And that doesn't exist anywhere except Puerto Rico. Now, I hope that I've made the strong case for you, because there are a number of major advantages here. There's a couple other things, nice things in Puerto Rico. First of all, Puerto Rico is kind of a weird place.

On the one hand, it's a beautiful Caribbean island. It's absolutely beautiful. And because of its geography, there are a bunch of interesting microclimates in Puerto Rico. You can have the beaches, you can be up in the hills. Mountain is kind of an aggressive term to use, but you can be up in the hills where it's a little bit cooler in the forest.

You can be on the beach. It's a beautiful Caribbean island. There's all kinds of things there that are offered in terms of different kinds of lifestyles. You can live in an exclusive high-dollar enclave. You can live very inexpensively. I've got friends who are living just standard Puerto Rican housing, very inexpensively, a few hundred dollars a month for two and three bedroom, serviceable two or three bedroom apartments.

So that's available there in Puerto Rico. And that could be really, really useful. Puerto Rico has the benefit of it being part of the United States. So that means unlike other places that you might like to go, you don't need, if you are a US citizen, you don't need any permission to go there.

It's easy to relocate. You don't have to apply for a residency visa. You don't have to apply for any kind of legal right to work. You can today, if you are a US citizen or a US person, you can today just simply get on an airplane and go there.

It's a domestic flight by the airlines, which is fairly cheap. You can fly on Spirit Air. Last time I went there, I took my wife there. And last time we went to Puerto Rico, I paid $104 for round trip tickets from Fort Lauderdale to San Juan. And we took one of our children too.

So you can find deals on a low budget cattle car airline like Spirit Airlines, et cetera, to go to Puerto Rico, which means you should probably go and check it out in person. But you don't need any permission. You can just simply get on an airplane and fly there.

You can rent an apartment. You can do that. Your cell phone works in Puerto Rico exactly like it works in the rest of the country. It's a domestic place. There's no passport. You can get Amazon. Amazon delivery in Puerto Rico, exactly the same as Amazon delivery in Miami, Florida.

And you are able to keep all of the normal constitutional protections that you're accustomed to. So just from a civil rights perspective, that can be really useful. The only thing you give up as a Puerto Rican resident is the right to vote and they have bad gun laws. But beyond that, you get all of the rest of the constitutional protections that you are used to.

There are some interesting benefits. For example, there's pretty decent creditor protection for a homestead. And one of the important things about Act 22 is that you're required to buy a home, buy a house in Puerto Rico. But Puerto Rico, in my understanding, has an unlimited homestead exemption. You have to properly file, I think, a special thing with a notary.

You have to fire a note with the notary public that this property has been designated as a safe home, an hogar seguro. But I read the ley del derecho de la protección del hogar principal y el hogar familiar. And it's basically, in my understanding, unlimited homestead exemption. So that's really, really useful to you.

So there's a lot of benefits to it. Officially, Puerto Rico has English as an official language, but it also has Spanish as an official language. But I've observed that the rate of English speaking has gone up significantly. So if Spanish is not your forte, you can get by pretty well in English.

And most of the young Puerto Ricans speak English adequately. There are a lot of higher costs. And some of those higher costs are due to it being simply an island where everything has to be shipped in. You could see this after the debacle with the hurricane when it came through and destroyed the island.

And if you just simply live on an island, you are far less secure in terms of the things that you have for yourself because everything has to be shipped in. It takes far longer to get supplies to Puerto Rico than it does to get supplies to Miami, Florida, just simply because you're on an island.

So that leads to a measure of insecurity. Now, on the flip side, houses in Puerto Rico are built much better. You buy a house in Puerto Rico, you're going to be buying a concrete house with a concrete roof. And you can stock up and provision yourself for some increasing resiliency.

I spent a bunch of time talking to all my friends there and trying to learn about what they face. Many of them, some of them were fortunate, they got power back after about two months. Some of them, it was more than six months with no power. And I talked to them about all the systems that worked and what didn't work, et cetera.

But it's not insuperable if you're in a situation where you're on an island, as long as you have something stockpiled and gas became available fairly quickly. The electricity did come on for many of them and most of them were able to work through. Puerto Rico has the benefits of the Latin culture.

You may like it, you may not like it, but there's a much greater appreciation of community in the Latin culture than in some of the more gringo culture. And there's a much more of a friendliness there. One of the comments that many of the electrical workers who were down trying to fix the Puerto Rican electrical grid would say was just that Puerto Ricans are incredibly friendly.

I heard stories about where people have been without power for months, but as the electrical workers are coming in restoring power, then everyone's cooking them food and just welcoming them. The electrical workers couldn't believe how welcoming the people who had nothing were. And so that was really, really powerful.

One of the comments that a friend of mine who was a Puerto Rican, born and raised in Puerto Rico, lived in Florida for several years and then moved back to Puerto Rico. One of the comments that they made about what they didn't like about living in the mainland United States was just simply the closed offness.

In the United States, everybody drives to their house, they park their car in the driveway, they walk in their house, the windows are always shut. And their comment was, "I could never hear the neighbors." You're used to hearing the neighbors. Go to Puerto Rico, you hear the neighbors. So it's got that Latin culture.

That could be a double-edged sword. Some people like it, some people don't like it. That could drive you nuts. Now, there are a lot of problems with Puerto Rico. First, there are major problems with the island itself and their economy. Puerto Rico is totally bankrupt. They've been trying to file for bankruptcy.

I haven't followed the case recently, but the Supreme Court, I don't think, let them file for bankruptcy. The Puerto Rican income is half that of Mississippi, which I think is the lowest income in the United States. They have a very high burdensome regulation, very high burdensome licensing requirements, et cetera.

It really scares me silly to try to think about being involved with that. I don't think the whole island... I'm not current on the politics of the island. I don't understand. What most people saw of Puerto Rican politics was the mayor of San Juan, who of course was fighting with President Trump after the big hurricane.

And I think if you only saw that, you would have an idea that everybody in Puerto Rico is extremely left-wing, very progressive, et cetera. I don't want to do business with that kind of place. It's very, very bad for business to go and try to make long-term commitments to that kind of culture.

But I don't think that was reflective of the island as a whole. Maybe it was reflective of the San Juan mayor, but not of the island as a whole. I don't have any accurate way to assess that because most of my contact with Puerto Rican people is with people who are extremely religious and religiosity would tend towards political conservatism.

Those two are tied together. Christian religiosity is generally tied to political conservatism based upon the basic claims of the Christian religion. And so lots of my friends there are extremely right-wing, et cetera. But I don't know what things on the whole are. But as with anything, I find it hard to trust them for the long-term because of that political instability.

I'm very concerned about the possibility that Puerto Rico could become a state. Now, this is, I think, one of those things where it's easy to overblow it. This has been an argument for years and years and years. But I think that the Puerto Ricans have a very strong case to make for becoming a state.

I think the political realities make that unlikely at the moment. But there seems to be, in my opinion, a very strong argument for statehood. Now, do strong arguments always win? I don't know. But if Puerto Rico were to become a state, then all of this advantage flies out the window.

I had an interesting exchange on Twitter yesterday. You can read it at the moment. It's still up on my Twitter profile, twitter.com/joshuasheets. I had an interesting exchange yesterday with an advocate, a political advocate for statehood. And they were talking about how they hate how all the rich US people are coming to the United States for the tax breaks.

And I explained to them, I don't know how Puerto Rico succeeds if it becomes a state because I see no reason why, if Puerto Rico weren't a commonwealth, I see no reason why any business person would want to go to Puerto Rico and invest there. If I were to go to Puerto Rico and invest there, I would be going there with fear and trembling.

Just because of all these factors, it's very, very difficult. And yet, the incentive from the tax perspective makes it worth it. And I see a lot of business people going there. Will it work out? I don't know. The change, the rules do change from time to time. Now, so far, I think that there's been a pretty decent stability.

One of the interesting things that some of the legal people point out is that this Act 20 and Act 22 thing is structured not as a tax law, it's structured as a contract, which in their defense makes it much more defensible in court. And there've been some court testing now of the Act 20 and the Act 22 status.

So I'm cautiously optimistic, very cautiously optimistic. You will pay higher, again, higher costs for many things. You will pay high income taxes. You will pay Social Security and Medicare and Medicaid taxes. You will pay very high sales taxes. You will pay a lot for permits and fees. It's a very paperwork-intensive society.

Again, back to that kind of left-wing, heavy licensing, heavy permitting, et cetera. So there are going to be a lot of costs. You will have to be a bona fide resident of Puerto Rico, which means you have to be there 183 days. If your desired lifestyle involves your traveling for much of the year, most of the year, if you can't physically be present in Puerto Rico for 183 days, you'd better not go.

So it works if you live in Puerto Rico and you will have to be there in Puerto Rico. You will not pay zero taxes, but if you have a very high profitability business, then it would be good. It can be very, very useful. You will need some excellent legal advice if you set this up.

You will need some excellent legal advice to make sure that your business is fully centered in the United States. And this is the problem because Puerto Rican Corporation is a non-US corporation. Well, a non-US corporation that is engaged in a trade or business in the United States is subject to US tax.

And so you've got to be very, very careful about how you set this up to make sure that you're disconnected from the United States properly. So just be very, very careful. You will want to get some good advice and make sure that all of your residency indications are to Puerto Rico.

You don't want to have a tax home that's outside of Puerto Rico. You need to establish closer connections to Puerto Rico than to any other place in the world. So this would include, you want to make sure your permanent home is in Puerto Rico. Make sure your family is in Puerto Rico.

Make sure all your personal belongings are in Puerto Rico. Make sure that your organizations, your social organizations, or political or professional or religious organizations are all in Puerto Rico. Do your banking in Puerto Rico. Make sure that you have a Puerto Rican driver's license. Make sure that you vote in Puerto Rico.

Everything needs to change to Puerto Rico so that you don't wind up targeted by the IRS and them saying, "Hey, listen, this is a sham." Yeah, you have a one-room apartment in Puerto Rico, but you have this big house in Texas that you go to. That's a sham. You cannot do that.

If you're going to save a huge amount of money, don't take that risk. What happens in the future? I don't know. I hope that this makes a big difference. There are glimmers of hope as to it making a difference, people starting to move there. There are glimmers of hope because Puerto Rico's cut its deficit, which is a good thing.

Time will tell. But it's a unique situation. If you are in a situation where you think that you can make a lot of money and you're not willing to consider renouncing US citizenship or you're not willing to consider that yet, Puerto Rico could provide you with a very powerful tax savings case.

And for that reason, I would encourage you to think about moving to Puerto Rico. I think for the majority of people, your first move should be to go fully offshore, outside of the United States and not to Puerto Rico. I think that's the best move for the majority of people.

But if you fit one of those categories that I described, Puerto Rico just might save you a bundle. As I close today's show, I want to give you just a quick mini little lesson here that relates to Puerto Rico, but more important relates to general tax savings, and use it as a way to encourage you to come on by radicalpersonalfinance.com and buy my credit card course, which is called How to Borrow Money Safely and Never Pay Interest Using Credit Cards.

One of the biggest challenges with tax planning is figuring out your activities in such a way that they are tax efficient. And there are many components to this. Basically, back when I first started teaching tax planning on the show, I talked about the different types of strategies, the timing strategies, conversion strategies, and shifting strategies of tax planning.

And one of the big strategies that's important to think about is timing, the timing of income. You can see how, in thinking about something like Puerto Rico, you can see how the timing of income makes a big difference. And even if you don't want to know about Puerto Rico today, if you don't want to move there today, by having this in the back of your head, you'll be able to make good decisions in the future.

You'll always be watching your affairs thinking, "Is my income about to blow up?" What hurts people is if they can't project and can't see. Now, for the average income earner, it just generally doesn't happen. You don't all of a sudden experience sudden windfalls, generally, that affect your taxes. But for a business person, you do have these situations.

It's not uncommon for a business owner to spend years investing in their business, working day in, day out, making extremely low profit, and then finally, for the pieces to come together, and all of a sudden, the profit goes through the roof. That's not a surprise. That's built in to, it's baked into the cake.

It's part of many business models. In addition to that, in your own personal life, you have to think very carefully about the timing of income. When do you take certain bits of income out? When do you recognize the gains? So there's a big, big deal to you. If you're going to move to Puerto Rico to take advantage of Act 22, you would want to be very careful in how you did that to make sure that the maximum amount of appreciation happens once you are eligible for Act 22, no interest on capital gains.

But yet, how do you live in the meantime? How do you avoid recognizing gain? How do you avoid triggering that gain? Well, there are a lot of ways that you can do it, but one of the most important ones is debt. Debt can be extremely useful because debt is not taxable.

This is the secret that real estate investors always rely on. You can, as a real estate investor, never pay taxes on your money if all your money is flowing into your checking account as a result of debt. Debt is non-taxable. When an investor takes out a mortgage on a property and then does a cash-out refinance, the mortgage is not taxable.

If you go out and use your credit cards and you swipe, swipe, swipe, swipe, swipe, all the money that you're spending is non-taxable expenditure. You can go to an ATM and you can put that credit card in there, take a cash advance. In one sense, that's income because now you have cash in your hands that you can spend, but from a tax sense, it's not.

It's debt, which is why when debt is canceled, you owe the IRS money for the cancellation of debt. If you have debt, you default on that debt, that debt is canceled, then you'll get a 1099 and you will owe the IRS the income, so the tax on that income for the cancellation of debt.

That's why. But you can use debt, such as credit cards or mortgages, etc., to provide you with cash flow while you are waiting to trigger income in an appropriate time, in an appropriate way. One of the problems, though, is most people just don't have access to that source of financing at low interest rates.

They don't have access to the ability to use debt as a way to be intelligent in their tax planning. It's hard for me to give specific suggestions to you because so many situations are different. The point is, I want you to imagine for a moment that at any point in time, you had access to, let's just call it 100,000, six figures, of spending power that you could use to buy things, to pay for things, to actual spendable money that doesn't trigger taxes.

Then imagine if you could be somewhat flexible and when you sold other assets to pay off credit cards. Then think for a moment if you could do that safely. That's what I did for you in my credit card course. The reason I created that course for you is because I think it's one of the biggest holes in many people's ideas is how do I access capital safely and at low rates so that I have another tool in my portfolio?

Because you can move to Puerto Rico and you can pay off all your credit cards from Puerto Rico as effectively as if you're living in Miami, Florida. You maintain all the same bank accounts. Everything works just like it, but there's a big difference as far as when you recognize your gains.

So you've got big capital gains. You're going to have big capital gains. If I had to do that, I'd move to Puerto Rico. I'd buy a house. I'd become qualified as a NAC 22 investor. I'd put in the mandatory, I think it's one year of residence. I would be happy to spend that on credit cards if I had to, to wait to trigger the gains under the more advantageous tax system.

But you will only be in that position if you do whatever you need to do now to put in place that infrastructure. So I'd invite you, if you haven't done so yet, go to radicalpersonalfinance.com/store and sign up for my credit card course. I think of it and I put it on my website one time as credit card exploitation, how to borrow money safely and never pay interest using credit cards.

All of my courses work together. The credit card course is a very important component of my how to survive and thrive during economic crisis course. And it's also an important component of the career and income planning course. So I just invite you, come on by radicalpersonalfinance.com/store. Check out that course.

It is a great value. I had my first refund yesterday and it wasn't refunded because the student didn't think it was good. It was refunded because the student was already an expert. Wrote to me and said, it was really good. I thought it was excellent, an excellent course. But I knew most of what you talked about.

That's the first one in many, many, many students who has actually known everything that I've talked about. So I immediately initiated the refund. I said, great, glad you enjoyed the course. I would invite you, come on right by radicalpersonalfinance.com/store. Sign up for my credit card course called How to Borrow Money Safely and Never Pay Interest using credit cards.

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