Puerto Rico recently enacted several laws amending the Puerto Rico Internal Revenue Code of 2011 (PR Code) to create savings accounts for people with disabilities (ABLE accounts), increase the deduction for contributions to education savings accounts and increase the deduction for contributions to Individual Retirement Accounts (IRAs). Puerto Rico also amended the Puerto Rico Incentives Code to clarify the provisions on the income tax exemption for gains realized on the sale of a primary residence in Puerto Rico for certain taxpayers.

Act 177-2025

Act 177-2025 adds new Section 1081.07 to the PR Code to create ABLE accounts, which allow taxpayers to save for expenses for people with disabilities. Expenses for qualified disabilities include education, living or accommodation, transportation, occupational training, health and personal assistance services. Contributions to ABLE accounts are limited to a maximum of $5,000 annually per designated beneficiary.

Amounts paid or distributed from ABLE accounts for expenses related to qualified disabilities or any amount that is considered a rollover will not be included in gross income. Amounts paid or distributed from ABLE accounts that are not used exclusively for qualified disability expenses will be included in gross income and subject to a 10% surcharge, unless:

• The distribution is made after the taxpayer reaches the age of 65
  or
• The amounts were transferred to another account through a rollover contribution

Act 177-2025 allows a designated beneficiary to direct investments of any contribution to the ABLE account no more than two times per calendar year. An ABLE account may be formed by:

• An insurance company authorized to do business in Puerto Rico and governed by the Puerto Rico Insurance Code
• A financial institution with a license issued by the Office of Financial Institutions Commission
• A Savings and Credit Cooperative with a license by the Corporation for the Supervision and Insurance of Cooperatives of Puerto Rico
• A financial institution, bank or savings association with a license issued by any state of the United States that is authorized to offer an ABLE account to its clients and institutions under the supervision of the Federal Deposit Insurance Corporation

Act 177-2025 also requires taxpayers to contribute to an ABLE account no later than the due date (including extensions) of the account owner's income tax return.

Act 178-2025

Act 178-2025 increases the deduction for contributions made to an education savings account from $500 to $1,000 for tax years beginning after December 31, 2024. The annual maximum contribution for education savings accounts was also increased from $500 to $1,000.

Act 179-2025

For tax years beginning after December 31, 2024, Act 179-2025 increases the deduction for contributions to IRAs to the maximum amount allowed under IRC Section 219(b)(5)(A) of the federal Internal Revenue Code (i.e., $5,000, adjusted annually for inflation). If the IRA documents limit the deduction to a lower amount, the documents will not have to be amended to adopt the new deduction limit.

Act 180-2025

Act 180-2025 amends Act 60-2019, better known as the Puerto Rico Incentives Code, to clarify the provisions on the income tax exemption for gains realized on the sale of a primary residence in Puerto Rico under the housing promotional program rules. Act 180-2025 references Act 60-2019 and Act 22-2012, which deny individual investors the income tax exemption for gains on the sale of a primary residence. Additionally, for tax years beginning after December 31, 2024, Act 180-2025 amends the existing exemption from regular income and alternate basic tax for gain realized on the sale of a primary residence in Puerto Rico by modifying the definition of primary residence. The amendment changes the length of time a primary residence must be owned before sale and includes rules for inherited property and property rented before sale.

Implications

Overall, these legislative changes appear to be aimed at enhancing financial security for individuals with disabilities, promoting savings for education and retirement, and introducing an element of equity to transactions involving the sale of a primary home. Specifically, the legislation supports individuals with disabilities by allowing them to establish an ABLE account to save for essential expenses, leading to improved financial security and quality of life. The amendment does not seem to provide a deduction for contributions to those accounts but only exempts the amounts received or distributed to the beneficiary that are used for the qualifying disabilities expenses.

The legislation also encourages education and retirement savings by increasing the deduction limits for education savings accounts and IRAs. In the case of IRAs, the maximum amount for tax year 2025 is $7,000.