Puerto Rico Military Pension Income Tax Exemption

Puerto Rico now exempts military pensions from income tax outright, and the statute is recent enough that most accounts still describe the older, narrower position. Ley 191-2024 amended Section 1033.18(a) of the Código de Rentas Internas de Puerto Rico de 2011 by adding a new paragraph granting a complete exemption from income tax on income derived from a military pension. The exemption reaches a person who is a veteran as defined in Ley 203-2007, is a retired member of the United States Armed Forces, and is a resident of Puerto Rico. All three must be true. It is claimable beginning with the 2025 tax year and forward. The law gave the Department of Hacienda and the Oficina del Procurador del Veterano one hundred eighty days from enactment to promulgate implementing regulations, so ask Hacienda for the current regulation and the correct schedule before filing. The Department of Hacienda's individual income tax instructions had already been treating a military pension paid to resident veterans and retired members as exempt; Ley 191-2024 put that on a statutory footing and tied the definition of veteran to the Carta de Derechos rather than to an instruction booklet. If you filed for a year before 2025 on the strength of the instructions, that is a separate question from the statutory exemption and is worth raising with Hacienda rather than assuming. The older benefit is still there and is different. Article 4C, First, of Ley 203-2007 gives every veteran a lifetime deduction of one thousand five hundred dollars, effective from the 2007 tax year, under what was Section 1023(bb)(4) of the 1994 Code and is now Section 1033.18(a)(2) of the 2011 Code. Published accounts describe it as three thousand dollars for a married couple filing jointly where both are veterans. It applies to income generally, not to the military pension, so a retired veteran can have both the pension exemption and the personal deduction. Two things this entry does not say. It does not state a current figure for any other Hacienda exemption, because the instructions change annually. And it does not address federal tax: VA disability compensation and Dependency and Indemnity Compensation are excluded from gross income under Internal Revenue Code section 104(a)(4) and are not Puerto Rico taxable income either, but Puerto Rico's income tax is its own code rather than a mirror, so do not reason from a federal rule to a Puerto Rico result without checking. The same 2011 Code carries a combat zone provision for compensation received for active service in a designated combat zone, with limits set out in the Hacienda instructions for the year. Ley 203-2007 Article 10 provides a rule of construction that matters here: the Act is to be interpreted in the way most liberal and beneficial to the veteran, and where its provisions conflict with any other law, whichever is more favourable to the veteran prevails.