In 2025, the Government of Puerto Rico enacted a number of legislative reforms aimed at modernizing the tax code and providing tangible economic benefits to residents. One of the most noteworthy of these is Law 180-2025, which introduces a capital gains tax exemption on the sale of a primary residence. This development represents a significant shift in how home sales are treated for tax purposes on the island.
Below, we take a deeper look at what Law 180 is, who qualifies, and the main advantages it offers to homeowners and the broader Puerto Rican economy.
What Is Law 180-2025?
Law 180-2025 amends the Puerto Rico Incentives Code to provide an exemption from income tax and the alternate basic tax on capital gains realized when a qualifying homeowner sells their primary residence. This tax incentive applies to tax years beginning after December 31, 2024 and is designed to encourage homeownership and make selling a primary residence more financially favorable for families living in Puerto Rico.
Who Qualifies for the Exemption?
To benefit from Law 180, homeowners must meet specific criteria:
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Primary Residence Requirement: The property must have been the seller’s primary residence for at least two out of the five years immediately preceding the sale.
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No Prior Incentive Benefits: Sellers who are beneficiaries of certain tax incentive programs (e.g., under Law 60-2019) do not qualify for this exemption.
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Use Restrictions: Properties that have been rented (either short-term such as Airbnb or long-term) during the qualifying period are typically not eligible for the exemption.
These requirements ensure that the tax benefit goes to bona fide, owner-occupied homes rather than investment or rental properties.
Key Benefits of Law 180-2025
Law 180 delivers a range of financial and economic advantages—both to individual homeowners and to the Puerto Rican housing market as a whole.
1. Higher Net Proceeds for Sellers
One of the most direct benefits of Law 180 is that it allows qualifying homeowners to keep more of the profit from selling their primary residence. Before this law was enacted, capital gains from such sales were generally subject to income tax in Puerto Rico. Thanks to the exemption, qualifying sellers can exclude those gains from their taxable income, often resulting in significantly higher net proceeds at closing.
For many families, this extra capital can be life-changing. It might mean more funds available for a down payment on a new home, paying off debt, investing in education, or simply improving financial stability.
2. Encourages Homeownership
By eliminating capital gains taxes for many seller homeowners, Law 180 removes a common financial deterrent from the process of buying and selling a home. Knowing they can sell without facing a significant tax bill may encourage more Puerto Ricans to invest in homeownership, helping turn long-term renters into homeowners while fostering a sense of local stability and community investment.
With homeownership rates linked to neighborhood stability and long-term economic growth, this benefit could have ripple effects across communities.
3. Stimulates Market Activity
Long-term homeowners have often hesitated to list their properties due to the looming capital gains tax on appreciated value. Law 180 mitigates this concern and is expected to encourage more property owners to enter the market, leading to improved liquidity in Puerto Rico’s housing sector.
This influx of listings can help balance supply and demand, making it easier for prospective buyers to find homes that meet their needs. In turn, increased market activity can support local real estate agents, lenders, and related service industries, boosting overall economic activity.
4. Greater Flexibility and Financial Planning for Families
The capital gains exemption under Law 180 offers families and individuals greater planning flexibility when considering whether to sell their homes. Instead of feeling forced to hold onto a property indefinitely to avoid tax consequences, qualifying owners can act more freely based on personal and financial circumstances.
This flexibility is especially meaningful in changing life stages—such as retirement, relocation for employment, or adjusting household size following family changes—and can make transitions smoother.
5. Potential Downward Pressure on Housing Prices
While there are many benefits tied to tax savings, Law 180 could also influence housing prices. By making it less costly to sell, homeowners may be more willing to price their properties competitively, potentially reducing upward pressure on home prices. This could be particularly beneficial in neighborhoods where homes have appreciated significantly but sales have been slow due to tax concerns.
Impacts Beyond Individual Sellers
The advantages of Law 180 aren’t limited just to homeowners. The law also has broader implications:
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Market Dynamism: Increased homeowner mobility and sales turnover can lead to a more dynamic housing market overall.
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Neighborhood Revitalization: With greater willingness to sell and reinvest, homeowners may take advantage of improved economic prospects to renovate older homes or move to new areas, contributing to neighborhood revitalization.
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Investor Behavior: While Law 180 targets owner-occupants rather than investors, the clarity it provides can help shape investment strategies and encourage balanced development rather than speculative holding.
Limitations and Considerations
It’s important to note that Law 180’s benefits do not apply to every property situation:
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Owner-occupied homes that were partially rented during the qualifying period generally do not qualify for the exemption.
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Short-term and long-term rental properties, vacation homes, and investment properties fall outside the scope of this law.
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Sellers benefiting from certain long-term tax incentive programs (e.g., Act 60 beneficiaries) are also excluded from this specific exemption.
These limitations are designed to focus the law’s benefits on residents with genuine primary housing needs rather than commercial investment interests.
Conclusion
Law 180-2025 represents a powerful legislative effort to make homeownership more financially advantageous in Puerto Rico. By exempting capital gains on the sale of qualifying primary residences, the law puts more money directly into the pockets of homeowners, encourages market participation, and supports economic mobility.
For many Puerto Rican families, the benefits of Law 180 extend beyond tax savings. They offer greater financial choice, improved market conditions, and better alignment with personal life goals. As the law is fully implemented and homeowners become more aware of its provisions, its effects are likely to continue shaping the island’s housing market in meaningful ways.
If you’re a homeowner—or considering becoming one—understanding the implications of Law 180 can be essential to making informed decisions about selling and investing in Puerto Rico’s rich and evolving communities.
