Taxes. Everyone’s least favorite topic but important information for those wanting to move to Costa Rica. So what is the luxury home tax? Below, I will go into detail of what this tax is and who it applies to.
What is the Luxury Home Tax and Who Needs to Pay it?
The Solidarity Tax for the Strengthening of Housing Programs or simply put, the luxury home tax, is an additional tax placed on homeowners who own a house, condominium unit, or apartment with a current value over ¢133,000,000.00 (approximately US$ 214,500).
Every 3 years, homeowners must do a luxury home tax evaluation to determine if their dwelling in Costa Rica is subject to the Luxury Home Tax. The tax rates start with 0.25% and end in 0.55% of the home’s value, determined by the home evaluation performed specifically for the luxury home tax. Payments of this tax must be made by Jan. 15 each year or penalties will be imposed.
The value of your constructed home, along with other improvements such as swimming pools, walls, bodegas, ranchos, sports fields, etc. is what will determine whether or not you need to pay this tax. The threshold at which the tax goes into effect only applies to these types of construction and improvements, but not the land itself. The land value will be added to the construction value only after you surpass this threshold. Then you will have to pay the tax based on the entire amount.
So what's the next step?
If you are a homeowner that is currently paying the tax, you should perform a new evaluation to determine if the dwelling remains subject to the tax for the next 3 years. As well as if there are any changes in regards to how much the tax would be for those following 3 years or if the home is even still subject to the tax.
If you are a homeowner that bought a new house, condo, or apartment during 2019-2021, you should perform the evaluation to determine if the dwelling is subject to the tax for the next three years.
If you are a condominium unit owner with an area of over 120 square meters (1,292 square feet) you should contact the condominium administrator to determine if there is a decision about addressing the valuation as a group and if not, consider performing his/her own evaluation.
In Conclusion
Taxes are not always a pleasant topic, but they truly are a small price to pay to live in paradise! These taxes are also very beneficial to the Costa Rican people because the purpose of this luxury tax is to build homes for people living in poverty.
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