Tax Considerations for U.S. Citizens Relocating to Costa Rica

Introduction: Navigating the Tax Jungle as a U.S. Expat in Costa Rica

Picture this: You're sipping a freshly brewed Costa Rican coffee on your terrace, surrounded by lush rainforests and the sounds of howler monkeys in the distance. The "pura vida" lifestyle you dreamed of is finally your reality—lower cost of living, year-round sunshine, and a welcoming expat community. But here’s the catch: the IRS hasn’t forgotten about you.

While Costa Rica doesn’t tax your foreign income (a major perk!), the U.S. government expects you to file taxes no matter where you call home. Worse yet, overlooking key rules—like FBAR filings for foreign bank accounts or Costa Rica’s 183-day residency threshold—can lead to steep penalties.

Why Taxes Get Tricky for U.S. Expats

• Double Duty: You’re juggling U.S. worldwide taxation and Costa Rican local tax rules.
• Hidden Traps: From PFIC penalties on investments to social security double-payments (no U.S.-Costa Rica treaty), pitfalls abound.
• Deadlines Galore: April 15 for IRS, June 16 for expat extensions, February 15 for Costa Rica—miss one, and fines follow.

But here’s the good news: With the right strategy, you can minimize liabilities and keep more of your hard-earned money. This guide breaks down everything from FEIE vs. FTC tax breaks to Costa Rica’s 0.25% property tax—so you can focus on beach sunsets, not bureaucracy.

Pura vida starts with smart planning. Let’s dive in.

1. U.S. Tax Obligations: Yes, You Still File (Even from Paradise)

Let’s bust a myth right away: Moving to Costa Rica doesn’t mean you’re off the IRS’s radar. As a U.S. citizen or green card holder, you’re required to file a federal tax return every year—no matter where you live—if your income meets the minimum thresholds.

Who Needs to File? (2025 Rules)

The IRS filing requirements are based on your global income, not just U.S. earnings. Here’s the breakdown:

Example: If you’re a freelance writer earning $15,000 from remote work while living in Santa Teresa, you must file—even if that income was paid by a German client into your Costa Rican bank account.

The Big Three: Key U.S. Tax Forms for Expats

1. Form 1040: Your standard tax return (with extra expat forms attached).
2. FBAR (FinCEN Form 114): Required if you have $10,000+ across foreign accounts at any point in the year.
• Penalty Alert: Up to $14,489 per violation for non-willful mistakes (and worse if the IRS suspects evasion).
3. FATCA (Form 8938): Triggers at higher thresholds (e.g., $200k+ for singles abroad).

"But What If I Didn’t File?" The Streamlined Fix

Many expats don’t realize they must file—until they get a nasty IRS notice. If you’re behind:

• Streamlined Procedure: Lets you catch up by filing 3 years of back taxes + 6 years of FBARs without penalties (if non-willful).
• Critical Rule: You must apply before the IRS contacts you.

Renouncing Citizenship? Think Twice.

Some frustrated expats consider ditching their U.S. passport, but it’s not a simple fix:

• $2,350 fee + potential "exit tax" on worldwide assets if you’re a long-term high earner.
• Better Option: Use the FEIE or FTC to legally reduce or eliminate U.S. taxes (more in Section 3).

Bottom Line:

• File annually, even if you owe $0.
• Report foreign accounts (FBAR/FATCA).
• Caught up? Streamlined can save you.

2. Costa Rica’s Tax System: Territorial and Resident Rules – What Expats Must Know

Costa Rica operates on a territorial tax system – one of the biggest perks for foreign residents. But what does this actually mean for your wallet? Let's break it down in plain terms.

The Golden Rule: Only Local Income Gets Taxed

• Foreign income is 100% tax-free in Costa Rica (pensions, US rental income, investments abroad)
• Local income is taxable (salaries, Costa Rican business income, rental properties in CR)
• Example: A retired couple with $4,000/month from US Social Security + $1,500 from a Costa Rican Airbnb only pays taxes on the $1,500

Resident vs. Non-Resident: The 183-Day Rule

Your tax status depends entirely on how long you stay:

Pro Tip: The clock starts ticking the moment you arrive. Even a 1-hour layover in San José counts as a "day" in Costa Rica for tax purposes!

2025 Tax Rates: What You'll Actually Pay

For residents with local income, rates are progressive:

For Employees:

• First ₡929,000 ($1,700): 0%
• ₡929,001–₡1,363,000 ($1,700–$2,500): 10%
• ₡1,363,001–₡2,392,000 ($2,500–$4,400): 15%
• ₡2,392,001–₡4,783,000 ($4,400–$8,800): 20%
• Over ₡4,783,000 ($8,800+): 25%

For Self-Employed:
Higher thresholds apply (first ₡4,094,000/$7,500 tax-free), but same max 25% rate.

Real-World Scenario: Digital Nomad in Tamarindo

• Income: $80,000/year from US clients (tax-free) + $20,000 from Costa Rican surf school
• Only taxable portion: The $20,000 (at ~15% effective rate)
• Total tax due: About $3,000 to Costa Rica (vs. $0 on the US income)

Critical Exceptions to Know

1. Capital Gains: 15% or 1.5% depending which one is great; also depends on how long you’ve owned the property and whether it was your primary residence
2. Dividends: 15% flat rate if from Costa Rican companies
3. Rentista/Pensionado Visas: No special tax breaks – same rules apply

Filing Requirements Made Simple

• Deadline: February 15 (for Oct 1–Sep 30 tax year)
• Forms: D-101 for residents with local income
• Good News: If you're employed, your company handles withholdings (no filing needed for most)

Red Flag: Many expats mistakenly think getting residency (like Pensionado) changes tax rules. It doesn't – only the 183-day rule matters!

Why This Benefits You

A teacher earning $50,000 remotely pays:

• $0 to Costa Rica (all income is foreign)
• $0 to US too (using FEIE up to $126,500)

Compare this to most European countries that tax worldwide income!

3. Double Taxation: No Treaty, But Smart Relief Exists

Here's the good news you've been waiting for: While the U.S. and Costa Rica don't have a tax treaty, you're not doomed to double taxation. The IRS provides powerful tools to protect your income - if you know how to use them strategically.

Your Three Weapons Against Double Taxation

1. Foreign Earned Income Exclusion (FEIE)
• What it does: Excludes up to $126,500 (2025) of earned income from U.S. taxes
• Best for: Employees and freelancers making under the exclusion limit
• Requirements:
• Pass either the Physical Presence Test (330 days abroad) or
• Bona Fide Residence Test (proving Costa Rica is your true home)

Example: A remote software developer earning $100,000 pays $0 U.S. tax if they qualify for FEIE.

1. Foreign Tax Credit (FTC)
• What it does: Gives you dollar-for-dollar credit for taxes paid to Costa Rica
• Best for: Those with higher incomes or who pay significant Costa Rican taxes
• Pro Tip: Can be carried forward 10 years if unused

Example: Pay $5,000 in Costa Rican taxes? That's $5,000 less owed to the IRS.

1. Foreign Housing Exclusion
• What it does: Deducts qualifying housing costs above the base amount ($20,240 max for 2025)
• Eligible Expenses: Rent, utilities, parking - but not furniture or improvements

FEIE vs. FTC: Which Should You Choose?

Smart Strategy: Many expats use FEIE for earned income and FTC for investment income - the best of both worlds!

Critical Pitfalls to Avoid

• FEIE Trap: If you exclude all income with FEIE, you can't contribute to an IRA
• Mixing Incomes: Can't use FTC for Costa Rican taxes against U.S. taxes on different income types
• State Taxes: Some states (California, Virginia) don't recognize these exclusions

Real-World Tax Savings Scenario

The Expat Family:

• Income: $150,000 (husband's remote job) + $20,000 (rental property in CR)
• Optimal Strategy:
1. Use FEIE on $126,500 of earned income
2. Use FTC on $23,500 remaining earned income + $20,000 rental income
• Result: Saves $37,000+ in U.S. taxes versus no planning

Special Case: The Digital Nomad Visa Advantage

Holders of Costa Rica's Digital Nomad Visa get:

• 100% foreign income tax-free in Costa Rica
• Still eligible for all U.S. tax breaks
• Essentially the best possible tax scenario

When to Get Professional Help

Consider hiring a cross-border tax expert if:

• You have business income in both countries
• Own rental properties
• Have complex investments
• Are unsure about FEIE/FTC optimization

Bottom Line: With smart planning, most expats can legally reduce their U.S. tax bill to $0 while taking full advantage of Costa Rica's territorial system.

4. Costa Rican Tax Filing: Deadlines, Rates, and Practical Tips for Expats

Navigating Costa Rica's tax calendar is like learning the local bus schedule - miss your stop and you'll pay for it. Here's your no-nonsense guide to staying compliant without the headache.

The Tax Year That Defies Logic (And Why It Matters)

While the U.S. runs January-December, Costa Rica's tax year operates on an October 1 - September 30 cycle. This quirky schedule catches many expats off guard.

Key Deadlines to Circle in Red:

• February 15: Annual tax return due (for the Oct-Sep period)
• Monthly/Quarterly: VAT filings if you run a business
• March 15: Self-employed provisional payments

Who Actually Needs to File?

The good news: Many expats slip under the radar. You likely don't need to file if:

• Your only Costa Rican income is from an employer (they handle withholdings)
• Your foreign income is your sole source of funds
• Your local business income is below ₡4,094,000 (~$7,500)

But you must file if you have:

• Rental income from Costa Rican properties
• Freelance/consulting income from local clients
• Business profits from a Costa Rican enterprise

2025 Tax Rates: What You'll Really Pay

Costa Rica uses a progressive tax system, but with much friendlier brackets than the U.S.:

For Employees:

For Self-Employed:
Higher thresholds (first ₡4,094,000/$7,500 tax-free) but same maximum 25% rate.

The Filing Process: Simpler Than You Think

1. Get Your DIME: Costa Rica's digital tax ID (like a SSN)
2. Track Your Income: Bank statements work as proof
3. File Online: Through the Hacienda's electronic system
4. Pay Any Balance: At approved banks or online

Pro Tip: The tax office (Hacienda) offers free workshops in English every January - worth attending.

Real-World Examples:

The Retiree:

• $3,000/month US pension + $500/month Costa Rican condo rental Only files on the $6,000 rental income Owes about $600 (15% effective rate)

The Entrepreneur:

• ₡10,000,000 (~$18,500) from local web design business After deductions, owes about ₡1,200,000 (~$2,200)

Special Considerations:

• Rental Properties: Can deduct maintenance, HOA fees, and depreciation
• Business Owners: Must issue electronic invoices (factura electrónica)
• Penalties: Late filings incur 1.5% monthly interest + possible audits

The Expat Advantage:

Unlike locals, most expats:

1. Don't need to file if living on foreign income
2. Can often avoid VAT registration
3. Face simpler reporting requirements

Bottom Line: Unless you're running a local business or renting property, there's a good chance you won't need to file Costa Rican taxes at all. But if you do, the process is straightforward with proper guidance. Ask us for Costa Rican accountant contacts.

5. Property and Investment Taxes: Maximizing Your Costa Rican Assets

Costa Rica's approach to property and investment taxes might just make you want to kiss your accountant - if you play your cards right. Here's how to navigate the system like a seasoned expat investor.

Property Taxes: The Best Deal in the Americas

Unlike U.S. property taxes that can reach 2% annually, Costa Rica offers:

• Flat 0.25% annual tax on registered property value
• No reassessment spikes - values grow slowly for tax purposes
• 90% discount if paid by December 31 each year (that's 0.025% effective rate!)

Example: A $300,000 home pays just $750/year if paid early (vs. $6,000+ in many U.S. states)

Luxury Home Surcharge:

• Applies to properties valued over ~$230,000 of construction value (₡137 million)
• Additional 0.25%-0.55% on the excess amount
• Still often cheaper than basic U.S. property taxes

The Hidden Gem: No Capital Gains Tax

Costa Rica doesn't tax capital gains on:

• Primary home sales (if owned 3+ years)
• Land appreciation
• Exception: Professional real estate flippers pay income tax

Smart Strategy: Many expats buy, improve, and sell every few years tax-free.

Real Estate Purchase Taxes

When buying property, expect:

Pro Tip: Always use a local abogado (lawyer) to verify the "real" registered value - it's often 30-50% below market price for tax purposes.

Investment Income: The Good and Bad

The Good:

• Dividends: Only 15% withholding tax (vs. 23.8% in U.S.)
• Interest: 15% on local bank accounts
• Foreign Investments: No Costa Rican taxes

The Bad:

• PFIC Rules: U.S. expats face brutal IRS penalties on foreign mutual funds
• Bank Reporting: Costa Rican banks share info with IRS via FATCA

Best Expat Investments:

1. U.S. stocks/ETFs (no PFIC issues)
2. Costa Rican real estate (tax-free gains)
3. Local CDs (15% tax vs. 30+% in U.S.)

Rental Property Rules

• Income Tax: Progressive rates (up to 25%) on net rental income
• Deductible Expenses:
• Property management
• Repairs/maintenance
• HOA fees
• Depreciation (2% annually of building value)

Example: A $2,000/month rental with $800 in expenses only pays tax on $1,200/month.

Corporate Structures: When to Consider Them

• Sociedad Anónima (SA): 30% corporate tax but asset protection
• Branch Office: No separate taxation if U.S. company
• Free Zone: 0% tax for qualifying export businesses

Golden Rule: Never incorporate just for taxes - the legal/compliance costs often outweigh benefits for small investors.

The Banking Advantage

• No tax on:
• Foreign account interest
• International wire transfers
• Currency exchange gains
• Reporting requirement: Only if over $10,000 aggregate (FBAR)

6. Social Security & Healthcare: The Double-Payment Dilemma

Costa Rica boasts one of Latin America's best healthcare systems—but for U.S. expats, the lack of a U.S.-Costa Rica Totalization Agreement creates a financial tightrope walk. Here's how to navigate it without falling into costly traps.

The Core Problem: Paying Into Two Systems

Unlike countries with social security treaties (like Spain or Italy), Costa Rica forces you into a tough choice:

• Option 1: Pay into both systems simultaneously (up to 15.3% to U.S. + 10.5% to Costa Rica)
• Option 2: Risk gaps in coverage by opting out of one

Example: A freelance consultant earning $80,000 could owe $12,240 to U.S. Social Security plus $8,400 to Costa Rica’s Caja—a brutal $20,640/year hit.

Costa Rica’s Caja System: What You Get

Mandatory contributions (2025 rates):

• Employees: 10.5% of salary (capped at ~₡4.1 million/month)
• Self-Employed: 9.34-10.54% of declared income
• Employers: Add 26.5% (if you have staff)

Coverage includes:
✅ Full healthcare (doctors, hospitals, meds)
✅ Maternity/paternity leave
✅ Disability benefits
✅ Small pension (after 300+ monthly contributions)

Reality Check: While Caja hospitals are affordable, many expats supplement with private insurance ($100-$300/month) for faster care.

U.S. Social Security: The Expensive Safety Net

Americans abroad must still pay if:

• You’re self-employed (15.3% on first $168,600 in 2025)
• You work for a U.S. company (6.2% employee portion)

Critical Exception:
If you’re employed by a Costa Rican company, you don’t pay U.S. Social Security—but your employer pays into Caja instead.

The Pension Trap: Will You Ever See That Money Again?

Brutal Truth: If you split your career between both countries, you might not qualify for either full pension. A 10-year U.S. contributor + 15-year Caja payer could get two partial checks that don’t cover living costs.

Smart Strategies for Expats

1. Digital Nomads:
• Use FEIE to reduce taxable income → lower U.S. Social Security bill
• Opt out of Caja if on a tourist visa (but lose healthcare access)
2. Retirees:
• Keep paying U.S. Medicare (Part A is free if you paid 10+ years)
• Use Caja as backup ($100/month for over-65s)
3. Business Owners:
• Hire through a Costa Rican S.A. → shift liability to Caja
• Deduct Caja payments as a business expense
4. Married Couples:
• Have one spouse pay into Caja (for healthcare)
• Other pays U.S. system (to protect pension)

The Healthcare Wildcard

While Caja covers basics, many expats choose:

• Private Insurance: $1,200-$3,600/year for full coverage
• Medical Tourism: Costa Rica/Panama/Mexico for major procedures
• Hybrid Approach: Caja for emergencies + private for specialists

Pro Tip: If over 65, joining Caja costs just 7% of declared income—often cheaper than U.S. Medicare supplements.

Bottom Line: No Perfect Solution

Without a treaty, you must:

1. Run the numbers—sometimes paying both systems makes sense
2. Prioritize healthcare access over pension dreams
3. Consult a cross-border CPA to model scenarios

7. Visa Types and Tax Implications: Choosing Your Costa Rican Tax Destiny

Costa Rica offers a buffet of residency options—but each comes with hidden tax consequences most expats don’t discover until it’s too late. Here’s the real breakdown (no sugarcoating).

The Visa/Tax Matrix: What Really Changes?

Key Insight: Your visa does not determine tax residency—only the 183-day rule does. A Pensionado who spends 5 months/year in Costa Rica avoids CR taxes on worldwide income.

Digital Nomad Visa: The Tax Sweet Spot?

Why expats love it:

• 0% tax on foreign income (even if you live here full-time)
• No Caja payments required
• IRS Bonus: Still qualify for FEIE up to $126,500

But…

• Must renew after 1 year (possible 1-year extension)
• Can’t work for Costa Rican companies
• Doesn’t lead to permanent residency

Pro Tip: Digital nomads earning under $126,500 can often pay $0 tax to both countries.

Pensionado vs. Rentista: The Retirement Showdown

Shocking Fact: Neither visa requires you to pay Costa Rican taxes on U.S. retirement account withdrawals—but the IRS still taxes them unless you use FTC.

Investor Visa: Real Estate Tax Hacks

Buying a $150K+ property gets you residency… and major tax perks:

• 0% capital gains if you hold for 3+ years
• 0.25% property tax (vs. 1-2% in U.S.)
• Rental deductions against CR-taxable income

Trap Door: If you sell within 3 years, profits are taxed as ordinary income (up to 25%).

Work Visas: The Caja Tradeoff

Employees in Costa Rica:

• Pay 10.5% to Caja (healthcare/pension)
• Employer pays 26.5% (yes, that’s 37% total)
• IRS Problem: May still owe U.S. self-employment tax if freelance

Loophole: Form an S.A. (corporation) to pay yourself dividends taxed at only 15%.

The Golden Rule: Visa ≠ Tax Strategy

1. Under 183 days? No CR taxes regardless of visa.
2. Over 183 days? Only CR-source income taxed (except Digital Nomads).
3. IRS Always Wins: You must file U.S. returns regardless of visa.

Most Overlooked Trick: A Rentista + 179-day calendar avoids CR tax residency while keeping residency benefits.

Bottom Line: Choose Based on Lifestyle

• Beach bum? Tourist visa + 179-day limit
• Remote worker? Digital Nomad + FEIE
• Retiree? Pensionado + FTC for IRA withdrawals
• Entrepreneur? Investor visa + S.A. structure

8. Common Mistakes to Avoid: Costly Tax Blunders Expats Make

Even savvy expats get tripped up by Costa Rica’s unique tax landscape. Here are the top landmines—and how to sidestep them.

Mistake #1: Assuming "No Tax Treaty" Means Double Taxation

Reality: While the U.S. and Costa Rica lack a treaty, IRS provisions like the FEIE and FTC can still eliminate dual taxes for most expats.

How to Avoid:

• Use FEIE if earning <$126,500 (2025)
• Switch to FTC if you have high Costa Rican taxes (e.g., local business income)
• Never claim both on the same income!

Mistake #2: Ignoring the 183-Day Rule

The Trap: Thinking your visa type determines tax residency. It doesn’t.

• Stay 182 days or less: Only CR-source income taxed
• Stay 183+ days: Worldwide income reportable (but foreign income still exempt)

Pro Tip: Track border crossings—Costa Rica counts partial days (even a 1-hour layover in SJO counts).

Mistake #3: Overlooking FBAR/FATCA for Costa Rican Accounts

Brutal Penalties:

• FBAR (FinCEN 114): $14,489 per violation for non-willful mistakes
• FATCA (Form 8938): $10,000+ fines for failure to file

Thresholds:

• FBAR: $10,000+ across all foreign accounts at any time
• FATCA: $200K+ (single) or $400K+ (married) abroad

How to Avoid:

• File annually if you hold any Costa Rican bank accounts
• Include joint accounts, pensions, and investment balances

Mistake #4: Misclassifying Rental Income

Wrong Way: Not reporting your Airbnb earnings because "it’s just side income."
Right Way:

• CR taxes rental profits at progressive rates (up to 25%)
• Deduct property management, repairs, HOA fees
• IRS Bonus: Use FTC to credit CR taxes paid against U.S. bill

Example: A $2,000/month rental nets $12,000/year after expenses → Owe $0 to IRS if CR taxes were $3,000 (FTC covers it).

Mistake #5: Accidentally Triggering PFIC Rules

The Killer: Investing in Costa Rican mutual funds or ETFs.

• PFIC = Passive Foreign Investment Company
• IRS taxes PFICs at up to 37% + interest penalties
• Worse: Requires ultra-complex Form 8621

Safe Alternatives:

• Stick to U.S. stocks/ETFs in your brokerage
• Buy physical real estate (no PFIC issues)
• Use local CDs (taxed at flat 15%)

Mistake #6: Forgetting State Taxes

Surprise: Some states (California, Virginia, New Mexico) still tax expats who:

• Keep a U.S. address
• Have state-sourced income (e.g., rental property)
• Maintain driver’s licenses/voter registration

Escape Plan:

• Establish domicile in no-tax states (Florida, Texas) before moving
• Sever all ties (close bank accounts, surrender license)

Mistake #7: DIY-ing Complex Situations

When to Hire a Pro ($500-$2,000/year):

• You own a Costa Rican business
• Have U.S. rental properties + CR income
• Are behind on filings (Streamlined Procedure requires precision)

Red Flags You Need Help:

• Received an IRS notice
• Have $200K+ in assets abroad
• Don’t understand FEIE vs. FTC optimization

Mistake #8: Not Using the 179-Day "Sweet Spot" Strategy

Golden Loophole: Spend 182 days in CR + 183 days elsewhere to:

• Keep Pensionado/Rentista residency benefits
• Avoid CR tax residency and U.S. state taxes
• Still qualify for FEIE

Ideal Calendar:

• Oct 1 - Mar 31: Costa Rica (182 days)
• Apr 1 - Sep 30: Portugal/Spain (183 days)

Bottom Line: Audit-Proof Your Expat Life

1. Track days religiously (use a spreadsheet or app like Rivo)
2. File FBARs by April 15 (automatic extension to Oct 15)
3. Never mix PFICs with U.S. investments
4. Hire a cross-border CPA if you have >1 income source

One Last Tip: The Costa Rican tax authority (Hacienda) offers free consultations in English—use them!

Conclusion: Your Action Plan – A Step-by-Step Guide to Stress-Free Expat Taxes

You didn’t move to Costa Rica to spend your days drowning in tax paperwork. Follow this 10-step action plan to stay compliant, minimize liabilities, and keep living pura vida—without nasty surprises from the IRS or Hacienda.

✅ Step 1: Determine Your Tax Residency (Before Jan 1)

• Under 183 days? You only pay taxes on Costa Rican-sourced income.
• Over 183 days? You must report worldwide income to Costa Rica (but foreign income remains tax-free).
• Track your days using an app like Rivo or a simple spreadsheet.

Pro Tip: If close to the limit, plan a border hop (Panama or Nicaragua) to reset your count.

✅ Step 2: Choose Your IRS Tax Strategy (FEIE vs. FTC)

Deadline: April 15 (or June 15 with automatic extension).

✅ Step 3: File FBARs for Costa Rican Bank Accounts

• Due: April 15 (same as taxes, but separate filing).
• Threshold: $10,000+ across all foreign accounts at any time in 2024.
• File Online: FinCEN’s BSA E-Filing System.

Penalty Alert: Non-willful violations can cost $14,489 per account per year.

✅ Step 4: Report Costa Rican Income (If Applicable)

• Who Must File? Only if you have CR-source income (rentals, local business, etc.).
• Deadline: February 15 (for Oct 1–Sep 30 tax year).
• Form: Declaración de Impuesto sobre la Renta (D-101).

Good News: If your only income is a salary from a Costa Rican employer, they handle withholdings—no filing needed!

✅ Step 5: Optimize Property Taxes

• Pay by Dec 31: Get a 90% discount (effective rate = 0.025%).
• Luxury Tax? Only if property value >₡137M (~$250K).
• Rental Deductions: Claim maintenance, HOA fees, and depreciation.

Example: A $300K home’s annual tax = $75 if paid early.

✅ Step 6: Avoid PFIC Nightmares

• Never invest in Costa Rican mutual funds/ETFs (IRS penalties up to 37%).
• Stick to:
• U.S. stocks/ETFs
• Local real estate (capital gains tax-free after 3+ years)
• CDs (15% withholding tax)

✅ Step 7: Handle Social Security Strategically

• If Employed Locally: Pay into Caja (10.5%) but not U.S. Social Security.
• If Self-Employed: You owe 15.3% to IRS + Caja (unless using FTC).
• Retirees: Keep paying U.S. Medicare if eligible (Part A is free after 10+ years).

✅ Step 8: Cut Ties with Tax-Hungry U.S. States

• Move domicile to Florida/Texas before relocating.
• Close:
• Bank accounts
• Voter registration
• Driver’s license

Warning: California audits expats who keep ties!

✅ Step 9: Consult a Cross-Border CPA (If…)

Hire help if you:

• Own a business in both countries
• Have $200K+ in assets abroad
• Are behind on filings (Streamlined Procedure can help)

Cost: ~$500-$2,000/year (a bargain vs. IRS penalties).

✅ Step 10: Automate for Next Year

1. Set calendar reminders for FBAR (Apr 15), CR taxes (Feb 15), etc.
2. Use expat tax software (e.g., MyExpatTaxes) for easy filings.
3. Keep digital copies of all tax docs in a secure cloud folder.

Final Thought: You’ve Got This!

By following this checklist, most expats can:
✔ Reduce U.S. tax bill to $0 (legally!)
✔ Avoid Costa Rican taxes on foreign income
✔ Sleep soundly knowing they’re audit-proof

Now go enjoy that sunset over Tamarindo—you’ve earned it. 🌅