Costa Rica taxes only Costa Rican-source income — so there is usually nothing to credit.
There is no US–Costa Rica income tax treaty and no totalization agreement. Costa Rica taxes on a territorial basis, which means income earned outside the country is generally not taxed there at all. For a remote worker or a retiree living on US income, that produces the Gulf outcome in a country nobody expects it in: no local tax, so no foreign tax credit, and the exclusion doing all the work.
Tax snapshot — Costa Rica
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Sources: IRS Publication 54; IRS Publication 514; IRS Publication 901 (no US–Costa Rica income tax treaty listed); SSA totalization agreement list; Rev. Proc. 2025-32. Checked 1 September 2026.
What that means on your return
Territorial taxation is the whole story. If your income is US-source — a US employer, US clients, a US pension — Costa Rica generally does not tax it, so there is no Costa Rican tax to credit. Above the exclusion, US tax is owed with nothing behind it.
That makes the foreign housing exclusion and the qualifying period the two things worth getting right, because they are the only levers available. A trip pattern that breaks the 330-day test costs real money here.
Costa Rican-source income is taxed, at rates to 25%. If you take local clients, run a local business or let property in Costa Rica, a creditable tax appears and the analysis changes.
Caja (CCSS) contributions are social security, not income tax, and are not creditable on Form 1116. Residency categories such as pensionado and rentista carry Caja obligations that are a cost rather than a credit.
With no treaty there is no residency tie-breaker and no mutual agreement procedure. Where the two systems disagree, there is no mechanism to resolve it — the risk sits with you.
Questions I get about Costa Rica
Do I pay Costa Rican tax on my US income?
Generally no. Costa Rica taxes on a territorial basis, so foreign-source income is usually outside its scope. The consequence for your US return is that there is no Costa Rican tax to credit.
So living in Costa Rica means paying less US tax?
Only up to the Foreign Earned Income Exclusion — $130,000 for tax year 2025. Above it there is no foreign tax credit to fall back on, so the marginal dollar is taxed at US rates. It is the same arithmetic as a Gulf posting.
Are my Caja contributions creditable?
No. They are social security rather than income tax, so they do not go on Form 1116.
When is my return due?
15 June, under the automatic extension for filers living abroad. Form 4868 moves it to 15 October, and I file the extension free.
Do I have to file an FBAR for my Costa Rican bank account?
If your foreign accounts together passed $10,000 at any point in the year, yes. You can file it free through FinCEN's own system. The non-willful penalty for not filing is $16,536.
I have not filed for several years. What now?
The Streamlined Foreign Offshore Procedures: three returns, six FBARs and Form 14653 certifying non-willfulness. Penalties are waived. Note that the IRS terminated the separate Delinquent FBAR Submission Procedures around 1 July 2026.
Filing from Costa Rica this year?
Twenty minutes with the Enrolled Agent who will prepare and sign it. Complete return, $599.
An IRS Enrolled Agent working only on US tax for Americans living abroad. I prepare and sign every return myself — 17 years in practice, 12 of them as an Enrolled Agent.