Deductions are allocated between ordinary income and income subject to preferential tax rates (e.g. certain interest income). This allocation is required only when income subject to preferential tax rates equals USD 20,000 or more.
Puerto Rican residents and non-resident US citizens can claim the following deductions to reduce their gross income. Puerto Rican non-resident foreign nationals may not claim these deductions.
Commencing on tax years after 31 December 2014, only contributions made to non-profit organisations duly qualified by the Puerto Rico Secretary will be allowed as deductions. The contributions are subject to 50% of adjusted gross income (AGI).
Interest paid on student loans for qualified individuals is deductible, as are contributions to Puerto Rican educational individual retirement accounts (IRAs).
Qualified medical expenses in excess of 6% of AGI (qualified expenses have been expanded) are allowed as deductions.
Mortgage interest paid on qualified residential property is deductible, limited to USD 35,000 or 30% of AGI, whichever is lower.
Contributions to Puerto Rican IRAs are deductible, limited to USD 5,000 per individual in addition to contributions made to employer sponsored qualified retirement plans. Contributions to government retirement systems are also deductible.
Casualty losses on a primary residence and certain personal property can be claimed as deductions.
Special additional deduction
A special additional deduction is available to certain taxpayers with compensation for services rendered, gains on sale of property, pensions, or alimony. The deduction is USD 5,350 for the 2013 tax year and phases out at a rate of 28.5 cents per every dollar in excess of USD 20,000 of gross income. The deduction for the 2014 tax year is USD 2,350 and phases out at a rate of 12.5 cents per every dollar in excess of USD 20,000 of gross income. There is no special additional deduction available for 2015 and subsequent taxable years.
There is no standard deduction in Puerto Rico.
The personal exemption for the 2015 and 2016 tax years is USD 3,500 per individual and USD 7,000 for married tax payers living together and filing jointly.
The exemption for each dependant is USD 2,500.
The veteran's exemption is USD 1,500.
Puerto Rican non-resident foreign nationals are not allowed any exemptions.