US Expat Taxes in Costa Rica
Latin AmericaTax Treaty
No
Tax System
territorial
Social Security
No Agreement
FEIE Qualification in Costa Rica
Physical Presence Test
Costa Rica's proximity to the US makes the 330-day physical presence test achievable but requires careful tracking of US trips. Many expats use the perpetual tourist strategy (border runs every 90 days), but this may weaken FEIE claims.
Bona Fide Residence Test
A Costa Rican DIMEX (cédula de residencia), registration with the Tributación Directa (tax authority), and a local CCSS (social security) membership support bona fide residence. Pensionado or Rentista visa status provides strong evidence.
Common Visa Types:
Costa Rica Tax System
Only taxes income earned within its borders. Foreign-sourced income is generally not taxed.
Tax Rates
Only Costa Rican-source income is taxed. Employment income: 0-25%. Business income: 5-30%. Capital gains: 15%.
No Totalization Agreement with the US — you may owe Social Security taxes in both countries.
US-Costa Rica Tax Treaty
The US does not currently have an income tax treaty with Costa Rica. This means you may not be able to use treaty benefits to reduce your tax liability, but the FEIE and Foreign Tax Credit are still available.
Banking & FBAR in Costa Rica
Major Banks (CRC)
FBAR Reminder
All Costa Rican bank accounts (colón and dollar-denominated) must be reported on FBAR if aggregate foreign balances exceed $10,000. Many US expats maintain both colón and USD accounts in Costa Rica, both of which count.
FATCA Compliance
Costa Rica signed a Model 1 IGA with the US in 2017. Costa Rican banks are increasingly FATCA-compliant and require US citizens to declare their US tax status. Some smaller banks may be less familiar with FATCA requirements.
Common Pitfalls for Americans in Costa Rica
No tax treaty means no treaty-based relief for double taxation - rely entirely on FEIE or FTC
No totalization agreement creates risk of double Social Security taxation for employed expats
Perpetual tourist status (visa runs) does not establish tax residency and weakens FEIE bona fide residence claims
Costa Rica's territorial system means limited local taxes paid, which reduces Foreign Tax Credit benefits
Rental income from Costa Rican property is taxable in both Costa Rica and the US with no treaty relief
Cost of Living Overview
Monthly Estimate
$1,200-$2,500
vs. US
30-50% lower than US average
Notes
Costa Rica is more expensive than most Central American countries but offers excellent healthcare and infrastructure. The Central Valley (San José area) offers lower costs than beach towns. Private healthcare is high quality and affordable.
FAQ: US Taxes in Costa Rica
Does Costa Rica's territorial tax system mean I do not pay local taxes?
If your income is sourced outside Costa Rica (remote work for a US employer, US investments, US pensions), it is generally not taxable in Costa Rica under the territorial system. However, any income earned within Costa Rica (local employment, Costa Rican rental property, local business) is taxable. You still owe US tax on worldwide income regardless.
Is the FEIE beneficial for US expats in Costa Rica?
Yes, the FEIE is often the best strategy in Costa Rica. Since the territorial system means you may pay little or no Costa Rican tax on foreign-source income, there are few Foreign Tax Credits available. The FEIE can exclude up to $130,000 (2025) of foreign earned income from US taxation.
Is there a tax treaty between the US and Costa Rica?
No. There is no income tax treaty between the US and Costa Rica. This means no treaty-based withholding reductions, no mutual agreement procedures, and no treaty-based residency tie-breakers. You must rely on the FEIE, Foreign Tax Credit, or housing exclusion to reduce double taxation.
Do I need to file FBAR for my Costa Rican accounts?
Yes. All Costa Rican bank and financial accounts count toward the $10,000 aggregate threshold for FBAR (FinCEN 114). This includes colón accounts, dollar accounts, and any investment or insurance accounts with cash value held at Costa Rican financial institutions.
How does the Pensionado Visa affect my US taxes?
The Pensionado Visa requires proof of at least $1,000/month in pension income. This pension income remains taxable on your US return. The visa grants Costa Rican residency, which supports FEIE qualification. However, pension income itself is not eligible for FEIE (only earned income qualifies), so you may need other strategies for pension income.
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