Retiring in Costa Rica: US Tax Guide for American Retirees
Costa Rica is a popular retirement destination for Americans, drawn by its natural beauty, political stability, and healthcare system. Costa Rica's territorial tax system (foreign income not taxed) creates unique US filing advantages for retirees. FileAbroad helps American retirees in Costa Rica navigate these cross-border questions.
Social Security Abroad
You can collect US Social Security benefits while living in Costa Rica. There is no U.S.-Costa Rica Social Security agreement in force. Social Security is generally taxable only in the US.
Pension & Retirement Account Income
US pensions, IRAs, and 401(k) distributions are generally taxable only in the US. Costa Rica's territorial system means foreign retirement income is not taxed by Costa Rica. FTC is essentially useless.
FEIE Limitations for Retirees
FEIE does NOT apply to pension or Social Security income. Retirees must rely on FTC or other strategies. But Costa Rica doesn't tax foreign income, so FTC is essentially useless. Retirees owe full US tax on retirement income (subject to standard deductions and credits).
Medicare Abroad
Medicare does not cover healthcare outside the US. Retirees in Costa Rica need CCSS (public) or private insurance (INS). Healthcare costs in Costa Rica are low and quality is high.
Cost of Living & Housing
Costa Rica's cost of living is moderate, lower than most US cities. Housing, healthcare, and daily expenses are affordable. Popular retiree areas include the Central Valley, Guanacaste, and the Southern Zone.
Visa/Residency for Retirees
The pensionado visa requires $1,000 per month in pension income. The rentista visa requires $2,500 per month in stable income. Both allow permanent residence.
Common Mistakes Retirees Make in Costa Rica
- Assuming FEIE covers retirement income — It does not.
- Not reporting Costa Rican bank accounts on FBAR — All foreign accounts are reportable.
- Not planning for Medicare gap — Medicare doesn't cover you abroad.
- Forgetting state tax — If you moved from California or New York, state tax residency rules may follow you.
When to Get Professional Help
You should consider professional help if you have retirement income from multiple sources, foreign accounts exceeding $10,000, property ownership in Costa Rica, or complex income situations.
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FileAbroad explains U.S. federal tax and U.S. international information-reporting consequences of documented foreign facts. It does not provide foreign-country legal or tax representation, valuation opinions, banking or remittance advice, or advice on what a foreign authority will accept.
Scope statement reviewed 2026-08-30 · FileAbroad product/content owner