Methodology
Every assumption, threshold, and citation behind the tropictax Act 60 calculator — so skeptics can verify our math.
This page enumerates every modeling assumption used by the tropictax
calculator, with citations to the underlying authority. If you spot a
discrepancy, the source code is open at
https://github.com/xmc2/tropictax.
Scope and filing status
The calculator currently models single filers only. Joint, head of household, and married-filing-separately statuses are out of scope for the launch. Joint-filer support is tracked as ticket TH-010 in our public backlog.
Tax year
All federal and state figures are for tax year 2025. Federal brackets, the standard deduction, long-term capital gains thresholds, and the QBI phase-out band are taken from IRS Rev. Proc. 2024-40, §3.01 (the official 2025 inflation adjustments).
- IRS Rev. Proc. 2024-40: https://www.irs.gov/pub/irs-drop/rp-24-40.pdf
Federal income tax brackets (single filer, 2025)
| Up to | Marginal rate |
|---|---|
| $11,925 | 10% |
| $48,475 | 12% |
| $103,350 | 22% |
| $197,300 | 24% |
| $250,525 | 32% |
| $626,350 | 35% |
| above | 37% |
Source: Rev. Proc. 2024-40 §3.01.
Standard deduction
$15,000 for single filers in 2025. Source: Rev. Proc. 2024-40 §3.16.
Long-term capital gains
Single-filer brackets for 2025:
- 0% rate up to $48,350
- 15% rate up to $533,400
- 20% rate above $533,400
Source: IRS Topic 409 (https://www.irs.gov/taxtopics/tc409) and Rev. Proc. 2024-40.
Net Investment Income Tax (NIIT)
A flat 3.8% surtax applies to investment income above $200,000 for single filers. This threshold is statutory and is not indexed for inflation. Source: IRC §1411.
Additional Medicare tax
A 0.9% surtax applies to wages and self-employment income above $200,000 for single filers. Like NIIT, this threshold is statutory and not inflation-indexed. Source: IRC §3101(b)(2).
Social Security wage base
The 2025 OASDI wage base is $176,100. Source: Social Security Administration 2025 Fact Sheet (https://www.ssa.gov/oact/cola/cbb.html).
Self-employment / FICA
- Social Security: 6.2% employee + 6.2% employer (12.4% self-employment), capped at the wage base above.
- Medicare: 1.45% employee + 1.45% employer (2.9% self-employment), uncapped, plus the 0.9% Additional Medicare surtax above the threshold.
- Self-employment base fraction: 0.9235 of net SE earnings, per IRC §1402(a)(12).
Qualified Business Income (QBI) deduction
IRC §199A allows a 20% deduction on qualified business income, subject to a single-filer phase-out band of $241,950 to $291,950 for 2025. The calculator applies the standard phase-out; the SSTB ("specified service trade or business") restriction is not separately modeled — the user is assumed to qualify within the phase-out band.
Source: IRC §199A; Rev. Proc. 2024-40.
Puerto Rico income tax brackets
Single-filer estimates per PR Hacienda guidance:
| Up to | Rate |
|---|---|
| $9,000 | 0% |
| $25,000 | 7% |
| $41,500 | 14% |
| above | 25% |
Source: PR Departamento de Hacienda (https://hacienda.pr.gov/). Treat as approximation; Hacienda publishes updates irregularly.
Act 60 annual costs and benefits
Modeled values (annual, single decree-holder):
- Annual filing fee: $5,000
- Required charitable donation: $10,000
- Flat distribution rate: 4% on qualifying business income
Sources:
- Act 60-2019 (Puerto Rico Tax Code §2031.02) and the Act 60-2024 amendments published by DDEC PR (https://www.ddec.pr.gov/act-60/).
- The fee and donation numbers track the current published schedule;
any subsequent legislative change is flagged in the changelog of
tax_constants/y2025.py.
State coverage
The calculator models all 50 US states plus the District of Columbia (51 jurisdictions in total) with marginal income-tax brackets sourced from each state's department of revenue. Special rules captured:
- Connecticut — explicit single-filer standard deduction ($15,000).
- California — single-filer standard deduction ($5,740) plus the 1% Mental Health Services Act surcharge above $1,000,000.
- Virginia — single-filer standard deduction ($9,000).
- Florida — no state income tax (zero deduction baseline used in comparisons).
States with no income tax (AK, FL, NV, NH, SD, TN, TX, WA, WY) are modeled at a 0% effective rate on ordinary income. New Hampshire and Washington capital-gains specifics are not separately modeled at this time.
Pre-move vs. post-move capital gains split
This is the differentiating piece of the Act 60 calculation and the most common source of misunderstanding.
The rule. Under Puerto Rico Act 60 / Act 22, only capital gains accrued after the taxpayer becomes a bona fide PR resident are eligible for the 0% PR rate. Gains that accrued before the move remain taxable by the United States even if the asset is sold after the move. The IRS treats pre-move appreciation as US-source income under the Section 933 sourcing rules.
Source. IRS Publication 570, "Tax Guide for Individuals With Income From U.S. Possessions," specifically the section on Section 933 sourcing of capital gains: https://www.irs.gov/pub/irs-pdf/p570.pdf — see "Special rules for gains from the disposition of certain property."
How the calculator models it. Capital gains are split into two inputs:
cg_premove— appreciation that accrued before PR residency began. Taxed at full US long-term capital-gains rates plus NIIT where applicable.cg_postmove— appreciation that accrued after PR residency. Taxed at 0% under Act 60 in the PR scenario; taxed at standard US LTCG rates in the US scenario.
Both fields default to zero so users with no capital-gains exposure see a clean comparison. The split is shown explicitly on the results page so users understand which portion qualifies for the Act 60 0% treatment.
What this calculator does not model
Acknowledging gaps is part of the methodology:
- Joint or head-of-household filing (TH-010).
- State capital-gains-only regimes (e.g. WA 7% LTCG surtax above $250,000) beyond the marginal-income-tax model.
- The four-year US-source phase-in for Act 22 / Act 60 decree holders who held their assets less than ten years before the move (separate partial-recognition rule).
- PR municipal license tax (patente municipal) and personal property tax.
- Federal AMT.
- ACA Premium Tax Credit interactions.
- State-level residency tail rules (e.g. California's safe-harbor / residency-audit posture).
For any of these, consult a qualified tax attorney or CPA before making a relocation decision. The calculator is an estimator, not advice.