Expert Guide to US Expat Taxes: Costa Rica

Thinking about living in Costa Rica? Many are drawn by the lush rainforests, lower cost of living, and vibrant expat communities. It’s easy to see why so many US citizens make the move. Many come for the eco-tourism and stay for the lifestyle—retirees, investors, and remote workers alike. But while the scenery is stress-free, taxes can get tricky. Buying property, receiving US income, or retiring abroad all come with potential tax obligations. This US–Costa Rica Expat Tax Guide will help you understand what to expect and how to stay compliant. With the right approach, you can enjoy “pura vida” without unexpected surprises from the IRS.

Do I Need to File US Expat Taxes?

US Tax Deadlines

Filing US Taxes for Your Family Abroad

Additional US Filing Requirements

US-Costa Rica Expat Tax Agreements

Costa Rica Immigration and Taxes

Tax Residency

US-Costa Rica Expat Tax Benefits

Costa Rican Self Employment

Investment Opportunities for US Expats

Retirement in Costa Rica for Americans

Make Filing US Taxes Simple with MyExpatTaxes

Do I Need to File US Expat Taxes?

Unfortunately, the answer is probably yes. No matter where you live in the world, if you are a US citizen or Green Card holder and you meet the filing threshold, you’ll have to file US taxes. In 2025, you’ll have to file your 2024 taxes if:

Filing Status	Income Threshold
Single	$14,600
Married Filing Jointly	$29,200
Married Filing Separately	$5
Self-Employed	$400
Qualifying Widow(er)	$29,200
Head of Household	$21,900

You might be thinking, “Why not just renounce my US citizenship?”. It’s a fair question—but not one to take lightly. Renouncing is permanent, costs $2,350 and could trigger a significant exit tax if you meet certain thresholds.

The good news? Staying compliant doesn’t have to be difficult. With the right guidance, you can meet your filing obligations and avoid penalties—without giving up your passport. Don’t believe us? Read on!

US Tax Deadlines

In the United States, the tax deadline for most individuals is April 15th each year. This is the date by which taxpayers must file their federal income tax returns with the Internal Revenue Service (IRS) and pay any taxes owed. If April 15 falls on a weekend or holiday, the deadline is typically extended to the next business day.

For US expats living abroad, the tax filing deadline is automatically extended to June 16th. Any taxes owed are still due by April 15 to avoid interest charges. If more time is needed, expats can request an additional extension, moving the deadline to October 15th.

It’s crucial to keep track of these dates to avoid late filing and fines. You can stay up-to-date the easy way with our Newsletter.

Fallen Behind on Your Expat Taxes?

If you have, you’re not alone! Many expats have failed to file for honest reasons. Often because they were unaware they had to file while living abroad. For that reason, the IRS have an amnesty program, the Streamlined Procedure. It allows you to catch-up on your taxes by filing just 3 years of back taxes and 6 years of FBARs.

If you meet the residency requirements, have a valid social security or taxpayer number, and your failure to file was non-willful, you could quality. The only catch is that you have to use the procedure BEFORE the IRS contacts you. Otherwise, you’ll be ineligible and subject to hefty failure to file penalties. So don’t delay in becoming IRS compliant the easy way.

Read more: Get Help with Unfiled Returns

Filing US Taxes for Your Family Abroad

Even in Costa Rican paradise, the IRS still expects you to pick the right filing status—whether you’re single, married, or head of household.

If you’re married to a non-US citizen in Costa Rica, they are not required to file a US tax return. You can choose “Married–Filing Separately” to keep your spouse’s global income outside of the IRS’s jurisdiction. Though some might choose “Married–Filing jointly” for greater tax benefits.

And if you’re married to a fellow US expat, then you both have to report your worldwide income and assets. Typically, “Married Filing Jointly” will be your best option.

Read more: Married Filing Jointly or Separately as an American Filing Taxes Abroad?

Expats in Costa Rica often overlook “Head of Household“, which could save you money if you support a qualifying dependent and are paying more than half to maintain your household during the tax year.

Additional US Filing Requirements

FBAR and FATCA exist to prevent tax evasion by requiring US citizens—including expats—to report foreign financial accounts and assets. This ensures the IRS has visibility into money held overseas.

FBAR (Foreign Bank Account Report)

If you’re a US expat in Costa Rica and your foreign bank accounts total over $10,000 combined at any time during the year, you must file an FBAR (FinCEN Form 114). It’s filed with the US Treasury, not the IRS, and noncompliance can lead to large penalties—even if no tax is due.

FATCA (Foreign Account Tax Compliance Act)

Under FATCA, US citizens must report foreign financial accounts and assets if they exceed certain thresholds (starting at $200,000 for single filers) on Form 8938, filed with your tax return. Many Costa Rican banks also report your info to the IRS. FATCA covers more types of assets than FBAR, including some pensions and investments.

These along with all the forms you typically need as an expat are supported by the MyExpatTaxes software.

US-Costa Rica Expat Tax Agreements

US-Costa Rica Tax Treaty

The United States and Costa Rica do not have a tax treaty in place. This means US citizens living in Costa Rica can’t rely on a bilateral agreement to reduce or eliminate double taxation. However, US expats can still claim relief through mechanisms like the Foreign Earned Income Exclusion and the Foreign Tax Credit. These provisions allow you to exclude a portion of your foreign income or offset your US tax liability with taxes paid to Costa Rica, depending on your situation. Read on for how you can make the most of these tax benefits!

US-Costa Rica Totalization Agreement

Similarly, at present there is no totalization agreement, which means there’s no official coordination between the two countries’ social security systems. Totalization agreements are designed to help workers avoid paying into both systems for the same work and to ensure benefits are not lost due to time split between countries. Without one, US expats working in Costa Rica may face the risk of contributing to both systems without the ability to combine coverage credits.

For US expats, this lack of an agreement means that Social Security contributions in Costa Rica won’t count toward your US Social Security benefits—and vice versa. You’ll generally need to meet each country’s minimum requirements separately to qualify for retirement benefits. As an expat, you’ll need to plan carefully, especially if you intend to retire in Costa Rica or split time between the two countries, to make informed choices about where to work and contribute.

Costa Rica Immigration and Taxes

Visas for US citizens

Before diving into US–Costa Rica expat tax rules, let’s review your visa options.

• Tourist stays: If you are planning to stay less than 180 days, you only need a return ticket and a blank passport page for the entry stamp.
• Study/Work Visa: Allows enrollment in a Costa Rican school or employment with a local company with sponsorship by an employer or educational institution.
• Digital Nomad Visa: Designed for remote workers earning at least $3,000/month ($4,000 if applying with family). Grants a one-year stay, with a possible one-year extension and exempts foreign income from local taxation.
• Investor Visa: Requires investing a minimum of $150,000 in Costa Rican real estate or businesses
• Pensionado Visa: This visa is designed for retirees with a guaranteed monthly pension income of at least $1,000. It allows expats to live in Costa Rica while enjoying most rights of residents, except voting.
• Rentista Visa: The Rentista Visa is for individuals with a stable, guaranteed income of at least $2,500 per month or a $60,000 deposit in a Costa Rican bank. It permits residency without engaging in local employment, though business ownership is allowed.
• Permanent Residency: If you’ve held Temporary Residency in Costa Rica for at least three years, you may qualify for Permanent Residency, which allows you to live and work in Costa Rica without restrictions.

Tax Residency

All Americans in Costa Rica have to pay taxes on income from Costa Rican sources, whether they are residents or non-residents. The good news is that US-source income is not taxable in Costa Rica, regardless of residency.

If you spend more than 183 days in Costa Rica during a tax year, you will be classified as a tax resident. Residents are subject to Costa Rican tax on income earned within the country at progressive rates, and must report your worldwide income to the local tax authorities.

Progressive income tax rates range from 10% for income above ₡929,000 CRC, to 25% for income over ₡4,783,000 CRC. This system applies to residents and is designed to ensure higher earners contribute a larger share of their income.

For non-residents, a flat rate withholding tax is applied depending on income type of between 5-30%. The withholding tax applies to income such as dividends, interest, management fees, and personal services from a Costa Rican source.

Costa Rican Tax Filing Requirements

In Costa Rica, residents need to file an annual tax declaration of local and foreign-sourced income, known as the “Declaración de Impuesto sobre la Renta.” The tax year runs from October 1 to September 30, with annual tax returns due on February 15 of the following year.

If you have an employment contract, your employer should file a tax return on your behalf. Individual filing is usually required only for additional income like self-employment, rental income, fees, commissions, royalties, or interest.

Social Security

Costa Rica’s social security system, known as la Caja, provides public healthcare and pension coverage through mandatory payroll taxes that apply to both residents and non-residents. The total social security tax is 37% of wages—with employees contributing 10.5% and employers 26.5% (2025). While the system offers access to healthcare and eventual pension benefits, contributions to la Caja don’t count toward US Social Security, and vice versa, due to the lack of a totalization agreement.

US-Costa Rica Expat Tax Benefits

There are several tax breaks under US-Costa Rica expat tax law that can create major savings on your US tax liability. Here are some of the most beneficial.

The Foreign Earned Income Exclusion

The Foreign Earned Income Exclusion (FEIE) allows US expats to exclude up to $126,500 of earned income from US taxes. That means that if you earn under $126,500 Costa Rica, you could reduce your US income tax bill to zero.

To qualify, you need to meet either the bona fide residence test or the physical presence test. This exclusion applies only to income earned from active work, such as salary, and self-employment income. Pensions, dividends, and rental income are not eligible.

If you meet the criteria for the FEIE, you may also be eligible for the Foreign Housing Deduction. This benefit reduces the costs of living abroad by allowing you to deduct up to $20,240 of reasonable housing expenses, such as rent and utilities, provided your costs exceed the base housing cost (16% of the FEIE limit).

Benefits for Families

As a parent living in Costa Rica, there are two expat tax benefits that could be of interest.

The Child Tax Credit (CTC) is a non-refundable credit that you can use to deduct up to $2,000 from your US tax liability per qualifying child under the age of 17. If your Child Tax Credit exceeds the taxes you owe, you won’t receive the excess amount as a refund, but you might be eligible for the Additional Child Tax Credit (ACTC).

The ACTC is a refundable credit, which allows you to receive a refund of up to $1,700–even if you don’t owe any taxes! To be eligible for the ACTC, you’ll need to have earned at least $2,500 and no income can be excluded with the Foreign Earned Income Exclusion.

The Foreign Tax Credit

The Foreign Tax Credit (FTC) lets US taxpayers reduce their US taxes by the amount of income tax they paid to another country. It’s a dollar-for-dollar credit that can be used for most forms of foreign income, including unearned income such as dividends, interest and rental income.

Costa Rica doesn’t tax foreign income, but if you pay tax on Costa Rican-sourced income, you can use that to lower your US tax bill. Note that only passive foreign income (like interest, dividends, or royalties) can be used to offset US tax on passive income, while general income (like wages or business profits) can only offset US tax on general income. Mixing categories of income isn’t allowed.

Costa Rican Self Employment

Thinking about starting your own business in Costa Rica—or already running one? Then it’s key to understand how self-employment taxes work for US expats.

The IRS still expects you to pay 15.3% in self-employment tax on your net income. That money goes toward your Social Security and Medicare in the US. If your net self-employment income is under $400 for the year, you’re off the hook. But if it’s over that amount, you’ll need to file and pay.

In Costa Rica, your self-employment income is taxed at progressive rates between starting at 10% for income over ₡4,094,000 and capped at 25% for income over ₡20,442,000. You should also plan for a percentage of income for Costa Rican social security tax.

Investment Opportunities for US Expats

Portfolio Investments

While Costa Rica has no restrictions on US expats holding local investments, many find it simpler to avoid Costa Rican financial instruments. Passive Foreign Investment Company (PFIC) rules apply to many non-US mutual funds, and can trigger complex reporting and punitive tax treatment by the IRS.

US citizens living in Costa Rica can freely invest in US stocks, bonds, and ETFs, which are often more tax-efficient and easier to report than foreign mutual funds.

Real Estate

Investing in Costa Rican property has become increasingly popular among US expats, especially in the wake of the pandemic, which spurred demand for spacious homes and scenic retreats. It’s still possible to find good value, but prices have gone up in popular expat areas like Tamarindo and Santa Ana. The great news is that foreigners can buy property with the same rights as locals, except for beachfront concession land (within 200 meters of the high tide line), which comes with stricter rules.

Prices vary widely depending on the region. In popular areas like Tamarindo, prices range from $1,900 to $2,385 per square meter, while in San José, they range from $1,300 to $1,800. Most expats pay in cash, since local banks rarely offer mortgages to foreigners, and when they do, the interest rates are usually high. Some US buyers tap into home equity or finance through banks back home instead.

The market here is less regulated than in the US, so it’s important to protect yourself. Property insurance is affordable—often just a few hundred dollars a year—but vital for covering earthquakes, flooding, and fire. Always work with a trusted local lawyer to check titles, zoning, and ensure there are no disputes or back taxes. A good lawyer and a reputable real estate agent are your best defense against costly surprises.

Retirement Accounts

Investing in a US-based Individual Retirement Account (IRA) is a popular option for expats looking to secure their retirement. US citizens living in Costa Rica can contribute to Traditional or Roth IRAs, but there are limitations. The annual contribution limit is $7,000 per year ($8,000 if you’re over 50).

To contribute, you must have taxable compensation reported on your US tax return. If you’re using the Foreign Earned Income Exclusion to exclude all your foreign income, that income doesn’t count toward your IRA. Instead, you can consider using the Foreign Tax Credit so your income remains taxable in the US, which could preserve your ability to contribute to an IRA.

Build Wealth for Your Future

If you’re thinking more long term than just this year’s taxes, we have the service for you. MyExpatInvest is a wealth management service that will match you to an international-specialist financial advisor.

We’ll match you with a financial consultant who understands the unique challenges of international living. Your specialist will craft a custom investment and retirement strategy, including guidance on US mutual funds, hedge funds, and PFIC reporting. Your first consultation is free, and we’ll pair you with the expert best suited to your financial goals.

Retirement in Costa Rica for Americans

Since it’s bid to encourage US retirees in the 1980s, Costa Rica has become perhaps the world’s premier choice for expat retirement. Retiring in Costa Rica offers a warm climate, peaceful lifestyle, and a relatively affordable cost of living.

Visas

The country actively welcomes retirees through its Pensionado Visa, which requires proof of at least $1,000 per month in lifetime pension income (such as Social Security). Once approved, the visa grants temporary residency, which can be renewed and eventually converted to permanent residency.

Social Security

If you’re receiving a US pension, Social Security, or other retirement income, you can still claim and collect it while living in Costa Rica. The US government allows benefits to be paid to eligible retirees living abroad, and Costa Rica is one of the approved countries. However, the US still taxes these payments, and you’ll need to file a US tax return each year. Costa Rica does not tax foreign-source income, so your US pension isn’t taxed locally—one of the key advantages for expats.

Healthcare

Costa Rica’s healthcare system is often ranked among the best in Latin America, making it a major draw for Americans living abroad. All legal residents, including Pensionado visa holders, must pay into the caja, which provides access to the public health system for a modest monthly fee of around 5-11% of reported income, depending on your income level. The care can be slow at times, but it’s reliable and comprehensive. Many retirees also use private hospitals and clinics, which are affordable by US standards and offer high-quality services. With both systems available, many expats choose a mix of public and private care for convenience and peace of mind.

Community

With its longstanding ties to the US, Costa Rica has a thriving expat community. It’s easy to meet others with similar lifestyles and values. Whether you’re retiring, working remotely, or just starting fresh, you’ll find support networks across the country. Popular hubs like Tamarindo, Santa Ana, and the Central Valley offer everything from social clubs and hobby groups to language exchanges and casual meetups. Making friends and building a community tends to happen naturally here, especially if you’re open to both expats and locals.

Make Expat Filing Simple with MyExpatTaxes

If reading our US-Costa Rica Expat Tax Guide is bringing you out in hives–don’t worry! Even though it might seem complicated, with the right tax solution, filing your US taxes can be surprisingly pain free.

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