TAXES 1720, Puerto Rico Income Tax Withholding
Published: June 14, 2017
Effective: Pay Period 06, 2017
Summary
The income tax withholding formula for Puerto Rico has changed. The previous exemption from tax withholding for all employees whose estimated annual wages do not exceed $20,000 is being eliminated. The full Puerto Rico tax formula will be applied for all residents and nonresidents to determine the appropriate annual taxable wages.
No action on the part of the employee or the personnel office is necessary.
Tax Formula
State Abbreviation: 
PR 

State Tax Withholding State Code: 
RQ 

Acceptable Exemption Form: 
499R 

Basis for Withholding: 
State Exemptions 

Acceptable Exemption Data: 
S/M/N/B/C, Number of Dependents, Allowance Based on Deductions, Personal Exemption 

TSP Deferred: 
Yes 

Special Coding: 
Determine the Total Number of Allowances field as follows: First Position  Enter the employee's marital status as indicated in Section A, Personal Exemption, of the exemption certificate. Valid entries are:



Note: If one of the filing statuses above is not claimed, the filing status will default to "S." 


Second and Third Position  Enter the total number of complete dependents claimed in Section B of Form 499R. 


Note: When entering the total number of dependents in Section B of Form 499R, if the employee does not claim one of the previously mentioned Marital Statuses, they need claim one (1) for each complete exemption. 


Determine the Additional Exemptions Claimed field as follows: First and Second Positions  Enter the total number of allowances based on deductions (Section C, item 4 of Form 499R). If the employee indicated the optional method, enter the number of allowances. If less than 10, precede with a 0. 


Determine the Personal Exemptions Claimed field as follows: Enter 0 in this field if the employee marked none in Section A, Personal Exemptions, of the exemption form. Enter 1 if the employee marked "Complete" or "Half." Note: Only Marital Status Code N can claim "Half" of a personal exemption. 


Determine the Veteran/Special Deduction field as follows: Enter 0 in this field if the employee claims no Veteran or Special Deduction. Enter 1 in this field if the employee claims additional Veterans Personal Exemption only. Enter 2 in this field if the employee claims Special Deduction only. Enter 3 in this field if the employee claims additional Veterans Personal Exemption and Special Deduction. 
Withholding Formula (Residents) (Effective Pay Period 06, 2017)
 Subtract the nontaxable biweekly TSP contribution (includes the biweekly TSP catchup contribution) from the gross biweekly wages.
 Subtract costofliving allowance (COLA) from the adjusted gross biweekly wages.
 Add the taxable biweekly fringe benefits (i.e., taxable life insurance) to the amount computed in step 2 to obtain the adjusted gross biweekly wages.
 Multiply the adjusted gross biweekly wages times 26 to obtain the annual wages.
Note: This authority does not allow employees to claim exemption from withholding. If the employee has claimed one or more exemptions, calculate tax using the steps below.
 Multiply the number of Allowances Based on Deductions claimed by the employee by $500 and subtract from the employee's annualized gross pay.
 If the employee claimed the taxpayer Personal Exemption, subtract the appropriate Personal Exemption amount (found in the table below) from the amount calculated in step 5.
 Subtract the appropriate Personal Exemption amount (found in the table below) from the amount calculated in step 6.
Marital Status Code
Marital Status
Personal Exemption Claimed
Amount of Deduction
S
INDIVIDUAL
Complete
$3,500
M
MARRIED
Complete
$7,000
N
MARRIED
Half
$3,500
B
MARRIED, Filing Separately
Half or Complete
$3,500
C
MARRIED, Filing Jointly Claiming "Optional Computation of Tax"
Half or Complete
$3,500
 If the employee has claimed the Additional Veterans Personal Exemption, subtract $1,500 from the amount calculated in step 7.
 If the employee is claiming MARRIED and has elected the Optional Computation of Tax, multiply the total number of dependents claimed by $1,250 each. If the employee is claiming MARRIED FILING SEPARATELY, multiply the total number of dependents claimed by $1,250 each. Otherwise, multiply the number of Complete Exemption dependents by $2,500 each. (Two joint exemptions equal one complete exemption). Subtract the result from the amount calculated in step 8 to arrive at annualized taxable wages.
 Using the following table, apply the appropriate formula to the annualized taxable wages:
Taxable Wages
Amount of Tax
Over $0 but not over $9,000
$0.00
Over $9,000 but not over $25,000
7% minus $630
Over $25,000 but not over $41,500
14% minus $2,380
Over $41,500 but not over $61,500
25% minus $6,945
Over $61,500
33% minus $11,865
 Divide the annual Puerto Rico tax withholding calculated in step 10 by 26 to obtain the biweekly Puerto Rico income tax withholding.
Withholding Formula (Nonresidents) (Effective Pay Period 06, 2017)
 Subtract the nontaxable biweekly TSP contribution (includes the biweekly TSP catchup contribution) from the gross biweekly wages.
 Subtract COLA from the adjusted gross biweekly wages.
 Add the taxable biweekly fringe benefits (i.e., taxable life insurance) to the amount computed in step 2 to obtain the adjusted gross biweekly wages.
 Multiply the adjusted gross biweekly wages times 26 to obtain the annual wages.
 Apply the annual wages to the following guidelines to compute the annual Puerto Rico income tax withholding amount:
Compute the Commonwealth of Puerto Rico Tax Withholding For:
By Multiplying the Gross Amount Wages By:
U.S. Citizen
20%
NonU.S. Citizen
29%
 Divide the annual Puerto Rico tax withholding calculated in step 6 by 26 to obtain the biweekly Puerto Rico income tax withholding.
Resource
To view the updated tax formula, go to the HR and Payroll Clients page from the MyNFC dropdown menu on the National Finance Center (NFC) homepage. Select the Publications tab and select U.S. Income Tax Formulas from the Publications menu to launch the tax map. Select the desired State from the map provided for the formula.
Inquiries
For questions about NFC processing, authorized Servicing Personnel Office representatives should contact the NFC Contact Center at 1855NFC4GOV (18556324468) or via the Internet using the Requester Console.