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

Last reviewed: September 2026. This guide is for general information only. U.S. and Costa Rican tax rules can change, and cross-border tax treatment depends on your facts. For personal advice, use a qualified U.S. tax professional and a Costa Rican accountant or tax attorney.

Moving to Costa Rica can simplify many parts of life, but it does not end your U.S. tax obligations. U.S. citizens and resident aliens generally remain subject to U.S. tax rules on worldwide income even while living abroad. At the same time, income connected to Costa Rica can create Costa Rican tax obligations.

The most important point is that the two countries do not apply the same rules. Your immigration status, days in Costa Rica, where you physically perform work, where property is located, and the type of income can all matter.

Do U.S. citizens still file U.S. taxes after moving to Costa Rica?

Generally, yes. U.S. citizens and resident aliens living abroad are subject to the same basic federal filing rules as taxpayers living in the United States and must report taxable worldwide income when they meet the applicable filing requirements.

Living in Costa Rica does not automatically make foreign earnings tax-free in the United States. Instead, qualifying taxpayers may be able to use provisions such as the Foreign Earned Income Exclusion, the Foreign Tax Credit, and the foreign housing exclusion or deduction.

Foreign Earned Income Exclusion (FEIE)

The FEIE can exclude qualifying foreign earned income from U.S. federal income tax if you have a foreign tax home and satisfy either the bona fide residence test or the physical presence test. The physical presence test generally requires at least 330 full days in foreign countries during a 12-month period.

The exclusion limit is adjusted annually. For tax year 2026, the IRS lists a maximum exclusion of $132,900 per qualifying person. The actual amount available can be lower depending on your income and qualifying period.

Important: the FEIE is not the same as being exempt from filing, and it does not automatically eliminate every U.S. tax. In particular, excluded foreign earned income is still reported on the U.S. return, and the FEIE generally does not reduce net earnings used to calculate U.S. self-employment tax.

Foreign Tax Credit (FTC)

If you pay qualifying foreign income taxes, you may be able to claim a U.S. Foreign Tax Credit, usually through Form 1116. The credit is subject to limitations and income categories, so it should not be described as an automatic dollar-for-dollar reduction of every U.S. tax liability.

Unused qualifying foreign tax credits can often be carried to other tax years under IRS rules, but the interaction between the FTC and FEIE can be complicated. A cross-border tax preparer should model which approach is appropriate for you.

Foreign housing exclusion or deduction

Some taxpayers who qualify under the foreign earned income rules may also qualify for a foreign housing exclusion or deduction for certain reasonable housing expenses. Limits vary by year and, in some cases, by location.

FBAR and FATCA reporting for Costa Rican accounts

U.S. reporting obligations can apply even when no additional U.S. income tax is due.

FBAR: A U.S. person generally must file FinCEN Form 114 if the aggregate value of foreign financial accounts exceeded $10,000 at any time during the calendar year. This is an aggregate threshold, not $10,000 per account.

FATCA / Form 8938: Separate reporting may apply to specified foreign financial assets. For many taxpayers living abroad, the thresholds are higher than the FBAR threshold and vary by filing status. For example, the general thresholds for an unmarried taxpayer who qualifies as living abroad are more than $200,000 on the last day of the year or more than $300,000 at any time during the year; higher thresholds apply to married couples filing jointly abroad.

FBAR and Form 8938 are different requirements and one does not necessarily replace the other. Direct ownership of foreign real estate is also different from ownership through a foreign corporation, partnership, trust, or other financial structure, which can create additional U.S. reporting requirements.

Does Costa Rica tax foreign income?

Costa Rica's income-tax system is principally source-based, often described as territorial. Costa Rican income-tax law focuses on income generated in Costa Rica, including income connected to services performed in Costa Rica, property located in Costa Rica, capital invested in Costa Rica, and rights used in Costa Rica.

This means it is too broad to say either that "all foreign income is tax-free" or that spending 183 days in Costa Rica suddenly makes all worldwide income taxable. The correct treatment depends on the source and character of the income and, in some cases, the taxpayer and entity involved.

Recent rules also contain limited exceptions involving certain foreign-source passive income earned by particular non-qualified entities that are members of multinational groups. Those rules are not a blanket worldwide-income tax on ordinary individual retirees or homeowners, but they are another reason to avoid relying on simplified internet summaries.

What about remote work for a U.S. company or U.S. clients?

This is one of the most misunderstood issues for Americans relocating to Costa Rica. The location of the client, employer, payment processor, or bank account does not by itself determine whether income is Costa Rican-source. Costa Rican law expressly looks to where services are performed.

If you are physically working from Costa Rica, do not assume your earnings are outside the Costa Rican tax system simply because your clients are in the United States or you are paid into a U.S. account. Remote employees, consultants, freelancers, business owners, and digital nomads should obtain advice based on their specific immigration and tax status.

What does the 183-day rule mean in Costa Rica?

More than 183 days of presence during the relevant fiscal period is an important test used in determining Costa Rican tax residence for individuals. Entry and exit days and certain temporary absences can require careful treatment under the applicable rules.

However, the 183-day test should not be used as a "tax loophole" or as a substitute for analyzing the source of income. Staying fewer than 183 days does not automatically make Costa Rican-source income non-taxable, and crossing 183 days does not by itself convert every foreign receipt into Costa Rican-source income.

Immigration residency and tax residency are also different concepts. Pensionado, Rentista, Investor, permanent residency, tourist status, and other immigration categories should not be treated as stand-alone tax strategies.

Is there a U.S.-Costa Rica income tax treaty?

Costa Rica is not currently listed by the IRS among countries with which the United States has a comprehensive income tax treaty. That makes domestic tax provisions such as the FEIE and Foreign Tax Credit especially important for many Americans with cross-border income.

Do not confuse an income tax treaty with other forms of international tax cooperation, information exchange, or FATCA arrangements. Those are different legal frameworks.

U.S. self-employment tax and Social Security

Self-employed Americans need special care. The FEIE can reduce qualifying income for U.S. income-tax purposes, but it generally does not reduce net earnings for U.S. self-employment tax.

The U.S. Social Security Administration's current list of international Social Security agreements does not include Costa Rica. In countries with a Totalization Agreement, coverage rules can sometimes prevent the same work from being subject to both countries' social-security systems. Because no such U.S.-Costa Rica agreement is currently listed, self-employed people and business owners should obtain advice about both U.S. Social Security/Medicare obligations and Costa Rican CCSS (Caja) obligations rather than assuming one payment cancels the other.

Taxes on owning real estate in Costa Rica

For most ordinary real estate, Costa Rica's municipal property tax is generally 0.25% of the registered property value. The old claim that owners receive a 90% discount merely by paying before year-end is not part of the general national property-tax rule and should not be relied upon.

Solidarity Tax on higher-value residential property

Costa Rica also has the Solidarity Tax for certain higher-value residential properties. It is based on the value of construction and fixed installations, with the applicable threshold updated periodically. For 2026, Hacienda announced a threshold of ₡143 million for qualifying construction and fixed installations, with progressive rates from 0.25% to 0.55% applied under the statutory calculation.

Because the threshold and valuation rules can change, owners should confirm the current year's figures with Hacienda rather than relying on an old dollar equivalent.

Capital gains when selling Costa Rican real estate

Costa Rica does have a capital-gains regime. The general capital-gains rate for a taxable gain is 15%.

There is a special rule for certain assets acquired before July 1, 2019: on the first sale after the capital-gains regime took effect, the taxpayer may be eligible to elect a 2.25% tax on the gross sale price instead of the general tax on the gain. This is not a universal choice available on every property sale.

An exemption may apply to the transfer of a taxpayer's habitual residence when the legal requirements are met. The exemption should not be described as a general rule that any property becomes capital-gains-tax-free after being held for three years.

For a seller who is not domiciled in Costa Rica, the law can also require the buyer to withhold 2.5% of the total consideration as a payment on account of the seller's potential capital-gains tax. This is another reason sellers should obtain tax advice before closing rather than after the transaction.

If you are buying or selling, also distinguish capital-gains tax from transfer tax, legal fees, registry costs, municipal taxes, and other closing expenses. They are separate items with different rules.

Rental income from property in Costa Rica

Income from real estate located in Costa Rica is Costa Rican-source income. The exact Costa Rican tax treatment depends on the ownership structure, activity, applicable tax regime, expenses, and other facts.

A U.S. taxpayer generally must also report worldwide rental income on the U.S. return. Foreign Tax Credit rules, depreciation differences, entity reporting, and the treatment of expenses can make the U.S. and Costa Rican calculations different even when the same property is involved.

If you are considering buying a vacation rental or investment property, have the ownership and tax structure reviewed before purchase. The best legal title structure for a real-estate transaction is not automatically the best U.S. tax structure.

Do U.S. retirees pay Costa Rican tax on Social Security, pensions or IRA withdrawals?

Costa Rica's territorial/source rules are often favorable to retirees whose income is genuinely foreign-source, but the answer should not be reduced to a blanket statement that every pension, Social Security payment, IRA distribution, dividend, or investment gain is always tax-free in Costa Rica.

Source, account structure, activities in Costa Rica, and future legislative changes can matter. On the U.S. side, retirement distributions and Social Security remain subject to U.S. tax rules even after a move abroad. A U.S. tax professional can determine how your particular retirement income is treated.

What about a Costa Rica Digital Nomad visa?

Costa Rica's digital-nomad regime has specific immigration and tax provisions for qualifying remote workers, but holding the status does not erase U.S. filing obligations. U.S. citizens still need to analyze U.S. worldwide income reporting, FEIE eligibility, self-employment tax, FBAR, FATCA, and any entity-reporting requirements.

Likewise, do not assume that a Digital Nomad visa, Pensionado residency, Rentista residency, or Investor residency automatically determines the tax treatment of every type of income. Immigration and tax rules overlap in some places but are not interchangeable.

Practical tax checklist before relocating to Costa Rica

• Map your income sources: salary, consulting, business income, pensions, Social Security, investments, rentals, and property sales.
• Identify where work is actually performed: this can affect Costa Rican source rules even when a client or employer is abroad.
• Review U.S. filing obligations: including Form 1040, FEIE/FTC eligibility, FBAR, FATCA, and any foreign-company, partnership, trust, or investment reporting.
• Review Costa Rican obligations: particularly if you will work from Costa Rica, operate a business, rent Costa Rican property, or sell real estate.
• Plan before creating an entity: a Costa Rican corporation or other structure can create U.S. reporting obligations and should not be formed solely because someone says it is a "tax hack."
• Keep records: travel dates, account balances, tax payments, purchase documents, improvement costs, and closing statements.
• Use qualified cross-border professionals: especially when you have business ownership, significant investments, rental property, or multiple jurisdictions.

Frequently asked questions

Do Americans living in Costa Rica still have to file U.S. taxes?

Generally yes, if they meet the applicable U.S. filing requirements. U.S. citizens and resident aliens abroad are generally taxed under U.S. rules on worldwide income, although exclusions and credits may reduce the amount ultimately owed.

Does Costa Rica tax worldwide income after 183 days?

Not as a simple blanket rule. Costa Rica principally taxes Costa Rican-source income. More than 183 days is an important tax-residence test, but tax residence and income source are separate questions.

If I work remotely for a U.S. company from Costa Rica, is the income automatically foreign-source for Costa Rican tax purposes?

No. Costa Rican source rules look at services performed in Costa Rica, so the payer's country or bank-account location does not by itself settle the issue.

Is there a tax treaty between the United States and Costa Rica?

Costa Rica is not currently on the IRS list of U.S. comprehensive income-tax treaty countries. Other information-exchange or FATCA arrangements should not be confused with an income-tax treaty.

Is Costa Rican real estate capital-gains-tax-free after three years?

No general three-year exemption applies simply because a property has been held that long. Taxable gains are generally subject to the capital-gains rules, with specific exceptions and special transitional rules that may apply in some cases.

What is Costa Rica's annual property-tax rate?

The ordinary municipal real-estate tax is generally 0.25% of the registered property value. Certain higher-value residential properties can also be subject to the separate Solidarity Tax.

Planning a move or property purchase?

Tax planning should be handled by qualified tax and legal professionals, but your real-estate decisions often need to be coordinated with that advice before you sign a purchase, sale, or ownership-structure document.

Broker Costa Rica can help you understand the practical real-estate side of buying, owning, renting, or selling property in Costa Rica and coordinate with your attorney, accountant, and other professional advisers. Contact Tony & Anna Velez if you are considering a property purchase or sale in Guanacaste or elsewhere in Costa Rica.

Disclaimer: This article provides general educational information and is not U.S. or Costa Rican tax, accounting, immigration, investment, or legal advice. Tax rules change and individual facts matter. Always obtain advice from appropriately qualified professionals for your situation.