US Tax Obligations in Costa Rica: Complete Guide (2026)
Last updated March 2026
The United States taxes citizens on worldwide income regardless of where they live. Moving to Costa Rica does not change this. You still file a US return every year, and you pick up additional reporting requirements — FBAR, FATCA, and potentially Form 5471 — the moment you open a foreign bank account or form a Costa Rican entity.
Key Penalties for Non-Compliance
| Requirement | Threshold | Penalty for Non-Filing |
|---|---|---|
| FBAR (FinCEN 114) | Foreign accounts > $10,000 aggregate at any point | Up to $10,000/account/year (non-willful); up to $100,000 or 50% of balance (willful) |
| FATCA (Form 8938) | Foreign assets > $200,000 (end of year) or $300,000 (any time) for expats filing jointly | $10,000 penalty; up to $50,000 for continued non-filing |
| Form 5471 | Ownership in a controlled foreign corporation (S.A., S.R.L.) | $10,000 per form per year; additional $10,000/month up to $60,000 |
| PFIC (Form 8621) | Any ownership in a Passive Foreign Investment Company | Highest ordinary income rate + interest charge on gains (effectively 40-50%+) |
Costa Rican Entity Traps
Many expats form a Sociedad Anonima (S.A.) to hold property or run a business. A Costa Rican S.A. is treated as a per se corporation by the IRS — you cannot elect to have it disregarded. This triggers Form 5471 filing requirements and potential Subpart F income inclusions. A Sociedad de Responsabilidad Limitada (S.R.L.) may be treated as a disregarded entity with a proper election, but the default classification still requires careful planning.
Foreign Earned Income Exclusion
If you qualify through the Physical Presence Test or Bona Fide Residence Test, you can exclude up to $126,500 (2026) of foreign earned income from US taxation. This only applies to earned income — wages, self-employment, consulting. It does not apply to investment income, pensions, Social Security, or rental income.
Related Guides
- US Tax Obligations Living in Costa Rica — Detailed walkthrough of filing requirements
- Investing as a US Expat — PFIC risks, brokerage access, and portfolio strategy
- Estate Planning for Expats in Costa Rica — Cross-border estate and succession planning
- Hidden Costs of Moving to Costa Rica — Tax costs most families do not see coming
Sources: IRS.gov — International Taxpayers, Treasury.gov / FinCEN — FBAR
Cross-border tax compliance is where most families make expensive mistakes. A single missed FBAR can cost $10,000. Get it right from the start.
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