US Tax Guide for Retirees Living in Costa Rica

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 FEIE limitations, FBAR, and the cross-border questions that complicate filing.

Key Tax Issues for Retirees in Costa Rica

• FEIE does NOT apply to retirement income — Social Security, pensions, IRAs, and 401(k) distributions are not earned income.
• Costa Rica doesn't tax foreign income — Costa Rica's territorial system means your US retirement income is not taxed by Costa Rica. FTC is essentially useless.
• Pensioner visa (pensionado) — Requires $1,000/month in pension income. Allows permanent residence.
• Rentista visa — Requires $2,500/month in stable income.
• Social Security abroad — You can collect Social Security in Costa Rica. There is no U.S.-Costa Rica Social Security agreement in force.
• Medicare doesn't cover you abroad — You need CCSS (public) or private insurance (INS).
• State tax — If you moved from a high-tax state, state tax residency rules may follow you.

FEIE vs FTC for Retirees in Costa Rica

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.

For Americans still working part-time in retirement, FEIE applies to earned income.

FBAR & Reporting for Retirees in Costa Rica

Costa Rican bank accounts (Banco Nacional, BAC San José) are reportable on FBAR. Costa Rica uses the colón (CRC), so currency conversion is needed.

Common Mistakes Retirees Make in Costa Rica

1. Assuming FEIE covers retirement income — It does not.
2. Not reporting Costa Rican bank accounts on FBAR — All foreign accounts are reportable.
3. Not planning for Medicare gap — Medicare doesn't cover you abroad.
4. 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