<P> In general, United States citizens and resident aliens who are bona fide residents of Puerto Rico during the entire tax year, which for most individuals is January 1 to December 31, are only required to file a U.S. federal income tax return if they have income sources outside of Puerto Rico or if they are employees of the U.S. government . Bona fide residents of Puerto Rico generally do not report income received from sources within Puerto Rico on their U.S. income tax return . However, they should report all income received from sources outside Puerto Rico on their U.S. income tax return . Residents of Puerto Rico who are employed by the government of the United States or who are members of the armed forces of the United States also should report all income received for their services to the government of the United States on their U.S. income tax return . </P> <P> United States citizens or resident aliens who are not bona fide residents of Puerto Rico during the entire tax year are required to report all income from whatever source derived on their U.S. income tax return . However, a U.S. citizen who changes residence from Puerto Rico to the United States and who was a bona fide resident of Puerto Rico at least two years before changing residence can exclude from U.S. taxable income the Puerto Rican source income received while residing in Puerto Rico during the taxable year of such change of residence . </P> <P> Bona fide residents of Puerto Rico cannot claim deductions and / or credits allocable to or chargeable against Puerto Rican source income that is excluded from a U.S. tax return . The deductions and credits not attributable to specific income must be divided between excluded income from sources in Puerto Rico and income from all other sources to find the part that can be deducted or credited on a U.S. tax return . Examples of deductions not attributable to specific income include alimony, the standard deduction, and certain itemized deductions such as medical expenses, charitable contributions, and real estate taxes and mortgage interest on your personal residence . Personal exemptions are generally allowed in full . </P> <P> If you have taxable Puerto Rican source income on your U.S. income tax return, then you can claim a credit for foreign taxes paid to Puerto Rico . However, you are not allowed to claim a credit for foreign taxes paid with respect to Puerto Rican source income that is excluded from a U.S. tax return . Therefore, to properly calculate your foreign tax credit, you must reduce your foreign taxes paid by the amount of taxes allocable to excluded Puerto Rican source income . </P>

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