Moving Mid-Year: Your First Partial Year

Almost nobody moves on January 1, so the first year carries the most confusion and the most assumed relief that does not exist.

The central fact: Publication 570 provides special rules in the year of a move for the tax home test and the closer connection test, but none for the presence test. If you cannot satisfy one of the five presence conditions for the whole move year, you are not a bona fide resident of Puerto Rico for that year, however thoroughly you relocated in the second half.

What the year-of-move rule actually says

You satisfy the tax home and closer connection tests in the year you move to Puerto Rico if you meet all three of these:

1. You have not been a bona fide resident of Puerto Rico in any of the three tax years immediately preceding the move.
2. In the year of the move, you do not have a tax home outside Puerto Rico, and you do not have a closer connection to the United States or a foreign country than to Puerto Rico, during any of the last 183 days of the tax year.
3. You are a bona fide resident of Puerto Rico for each of the three tax years immediately following the tax year of your move.

Publication 570 illustrates it with a person who lived in the United States through May, moved to a territory in June, bought a house, took a permanent local job, and had their principal place of business there from July 1 through December 31, more than 183 days. If that person is a bona fide resident for the following three years, the tax home and closer connection tests are satisfied for the move year. The example then adds the qualifier: they also have to satisfy the presence test. That qualifier is the whole problem.

The presence test in the move year

Your move year position has to come from one of the five conditions in the 183-day rule, explained. Each behaves differently in a move year.

At least 183 days in Puerto Rico. Achievable if you arrive by roughly the start of July, and only if you stay put. A July 2 arrival leaves exactly 183 days including the arrival day, so there is no margin for a mainland trip.

549 days over three years with 60 days each year. Not available in the move year, since the two preceding years have no Puerto Rico presence. It becomes useful later, and it is why a strong second and third year can carry a weaker fourth.

No more than 90 days in the United States. Sometimes the answer for a late move, but only if the pre-move months were spent outside the United States. Someone who lived in Denver until August has long since passed 90 United States days.

Under $3,000 of United States earned income plus more Puerto Rico days than United States days. Occasionally available where income is investment income rather than pay for personal services, but the day comparison still has to favor Puerto Rico, which a late move usually prevents.

No significant connection to the United States. The condition that most often saves a late move, and the one requiring the most deliberate preparation. A significant connection means a permanent home in the United States, current voter registration there, or a spouse or child under 18 whose main home is in the United States, subject to narrow exceptions. If you let go of the mainland home, cancelled the voter registration, and the family moved with you, this can be met even in a year with many United States days.

That argues for making the structural changes early in the calendar year rather than at the moment of physical relocation.

Move dates have consequences

First half of the year. The 183-day condition is available but tight. Land in June with 200 days remaining and you have 17 days of slack. Business travel eats that quickly.

Mid-year. July arrivals sit exactly on the boundary, so the count needs tracking from day one rather than review in the autumn.

Second half. The 183-day condition is gone. Your position depends on an alternative, most likely no significant connection, and that has to be arranged rather than discovered.

Waiting for January. Sometimes the cleanest answer is to complete the move late in the year but treat the following year as the first claim year. That decision belongs to your tax advisor, not a rule of thumb.

The two three-year windows

The rule looks backward three years and forward three years, and both windows are conditions rather than suggestions. The backward window stops the rule being used to smooth over an on-and-off residency pattern. The forward window is a commitment made at the time of the move and tested later: leave after two years and the foundation for the move year relief is not there.

So your first four tax years are a single connected position rather than four independent ones. Track continuously across all of them, which is also when the 549-day condition starts to work as a backstop.

The year you leave

Publication 570 sets out a rule specific to Puerto Rico for departures. You are treated as a bona fide resident for the part of the tax year preceding your move if you are a United States citizen, you were a bona fide resident for at least the two tax years immediately preceding the move year, and you cease to be one during the tax year.

Publication 570 pairs this with the requirement that you cease to have a tax home in Puerto Rico during the year and that you had a closer connection to Puerto Rico throughout the part of the year before that. Its example describes someone who was a bona fide resident for two full years, kept their principal place of business in Puerto Rico through early May, then moved to Nevada. They failed all three tests for that year and were still treated as a bona fide resident from January 1 through the move date.

The general year-of-moving-from-a-territory rule is written for American Samoa, the Commonwealth of the Northern Mariana Islands, Guam, and the United States Virgin Islands. Puerto Rico has its own provision.

Starting the count on day one

The year you begin or end bona fide residence is usually the year Form 8898 enters the picture, when your worldwide gross income exceeds $75,000. Its closer connection questions should match the file you have been building. See how to document presence for an audit.

Move years also generate the messiest travel records: closings, storage, schools, temporary housing on both ends, and trips back to wrap things up. They are the years where the count is tightest and the evidence is most likely to be rebuilt later from memory.

One83 is built to be running before the move rather than after it, so the pre-move months are recorded as they happen and the alternative conditions can be evaluated with real numbers. Knowing in April that a September arrival puts you outside the 183-day condition changes a plan while it can still be changed.

Before fixing a move date, work through what counts as a day in Puerto Rico, ferries, cruises and day trips, and presence test vs tax home vs closer connection.

Frequently asked questions

Does the year-of-move rule waive the presence test?

No. It applies to the tax home and closer connection tests only. The presence test still has to be satisfied for the move year on its own terms.

What are the conditions for the year of moving to Puerto Rico?

Three: you were not a bona fide resident in any of the three preceding tax years, you have no tax home outside Puerto Rico and no closer connection elsewhere during any of the last 183 days of the move year, and you are a bona fide resident for each of the three tax years immediately following.

If I move in September, can I still qualify for that year?

Only if you satisfy one of the five presence conditions for the full tax year, which is difficult after a late move. The alternatives that sometimes work are the 90-day condition and the no significant connection condition.

What happens if I leave Puerto Rico within three years?

The relief is conditioned on bona fide residence for each of the three tax years following the move year. If you do not complete them, the basis on which you satisfied the tax home and closer connection tests no longer holds.

Is there a rule for the year I leave Puerto Rico?

Yes, a Puerto Rico specific one, summarized above. It requires two full prior years of bona fide residence and a closer connection to Puerto Rico up to the point you cease to have a tax home there.

Disclaimer

One83 is a presence tracking tool, not a tax advisor, and this guide is general information rather than tax advice. Move year positions are fact specific and interact with rules that change over time. Consult a licensed tax professional experienced with Internal Revenue Code section 937 and Puerto Rico Act 60 before setting a move date or taking a filing position, and see IRS Publication 570 for the official rules.