Progressive Taxation Explained: What Luxury Homeowners Need to Know

Navigating the luxury property tax system in Costa Rica can feel overwhelming. The progressive tax system requires homeowners to understand how different brackets affect their obligations. This article breaks down everything you need to know to ensure compliance while optimizing your tax strategy.

Understanding Progressive Taxation:
Progressive taxation means the tax rate increases as the value of your property rises. Costa Rica’s luxury property tax (Impuesto Solidario or ISO) applies to properties valued over ₡145,000,000, with rates ranging from 0.25% to 0.55%. Here’s a quick look at the brackets for 2025:

·     First ₡364,000,000: Taxed at 0.25%.

·     Next ₡367,000,000: Taxed at 0.30%.

·     Above ₡2,193,000,000: Taxed at 0.55%.

Example Calculation:
For a property valued at ₡450,000,000:

·     First ₡364,000,000 × 0.25% = ₡910,000.

·     Remaining ₡86,000,000 × 0.30% = ₡258,000.

·     Total Tax: ₡1,168,000.

Why Does This Matter to You?
Knowing these brackets helps you plan better, avoid penalties, and explore options like reassessing your property to reduce taxable value.

For a deeper dive into this topic, we invite you to listen to our latest podcast episode below.