Three Tax Reasons to Retire in Panama in 2025
With low property taxes and tax-free foreign income, this tropical paradise could make you rethink retirement as a U.S. expat.


When you think of Panama, you might remember history class, learning about the famous waterway connecting the Pacific and Atlantic oceans. And lately you may have heard about the country when Panama Canal tariff hikes were in the news.
But there's more to this country than the Panama Canal.
In recent years, Panama has become an attractive destination for retirees seeking tax advantages and a lower cost of living.

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Panama offers several perks for U.S. retirees. In addition to low property taxes and generally tax-free medication, living in Panama boasts a one-time exemption on import tax (generally for household goods and personal effects), no double taxation on foreign-earned income, and loads of immigration discounts.
Sound interesting? Buckle your seatbelts and prepare for takeoff to this Central American destination.
Related: Three Tax-Friendly Reasons to Retire in the Bahamas
Retire in Panama as a U.S. citizen
The U.S. Embassy of Panama published a list of what’s required to retire in Panama. First, you will need a passport and round-trip ticket to enter the country.
Then, if you plan on staying for retirement, you will need to apply for a visa in Panama with the following documents:
- Notarized proof of income of at least $1,000 per month (this can be Social Security, IRAs, pensions, etc.)
- A clean criminal background
- Registration form (you obtain this through the Immigration Office in Panama City, the country’s capital)
- Certificate of health by a Panamanian doctor
These and other documents must be submitted through a Panamanian attorney. Be sure to check the Embassy for all eligibility requirements.
Panama retirement visa requirements
The Pensionado visa is “considered to be among the best retirement programs in the world,” according to the Panama Embassy. And for good reason, too.
Currently, a U.S. citizen retiring in Panama may enjoy:
- 25% discounts on utility bills
- 25% discount on airline tickets, and 30% discount on other modes of transport
- 10% discount on medicines (medication is generally tax-free)
- 50% discount on movie theatres and sports and cultural events
- 15% off dental and eye exams
- 50% off hotels Monday through Thursday, and 30% off on weekends
You might also receive a one-time import tax exemption for household goods (up to $10,000).
What are household goods? According to U.S. Customs and Border Protection, these goods include furniture, paintings, linens, instruments, tableware, etc.
If you take these goods to Panama within the specified monetary limit, they should generally be tax-exempt (as long as you have an appropriate visa).
But that’s not the only Panama savings.
Cost of living in Panama vs. U.S.
Panama has a lower national average cost of living than many places in the United States. To illustrate this, let’s compare Panama to a U.S. state with a similar climate, like Florida, for example.
According to the online database Numbeo, as of January 2025:
- Rent prices in Panama City are 59.78% lower than in Miami.
- A one-bedroom apartment in Panama City's city center costs about $1,073 per month, compared to about $2,811 in city center Miami.
- Many grocery prices in Panama City are lower than in Miami (milk is an outlier).
- Consumer prices in Panama City are 33.7% lower than in Florida.
Panama property taxes: How much do you pay?
Thanks to Law 66, enacted seven years ago, Panama's property tax rate schedule is relatively straightforward.
- Current tax brackets in Panama on a primary residence vary from .5% to .7% of a property’s assessed value.
- Furthermore, if the property is $120,000 or less and meets certain requirements, it can be exempt from tax.
Imagine waking up on the beach without paying property taxes.
Plus, even secondary residences qualify for some tax relief in Panama. Vacation homes pay $0 in property taxes if they are worth $30,000 or less. Other secondary property varies between .6% to .8% of the asset’s value.
Note: Sometimes, in the U.S., vacation homes are treated differently for tax purposes than main residences., which can result in a higher tax burden. So, moving to Panama could be a way to reduce your property tax.
Here are a couple of other fast facts:
- You’ll pay no property tax in Panama for three years on certain new constructions priced between $120,000 and $300,000 (some conditions may apply)
- You may be able to receive a 10% discount on property taxes paid early if you fill out paperwork at the General Revenue Directorate (the taxpayer’s office) in Panama City
It's worth noting that Panama is generally considered to be just south of the “Hurricane Belt” (where Atlantic hurricanes develop). So, the country tends to experience tropical storms rather than hurricane-level ones. Fewer major storms could mean lower home insurance rates.
Does Panama tax U.S. Social Security income?
Under Panama tax law, you’ll still need to pay the IRS federal taxes on Social Security and U.S.-source income. However, Panama doesn’t tax foreign-sourced income.
But health insurance is another matter.
According to the Social Security Administration, Medicare generally doesn’t cover services outside the U.S. If you want to be covered in Panama, you may need to invest in private health insurance.
Yet there may be some good news.
- Panama's private insurance rates can range between $50 and $200 a month.
- Panamanian health insurance is significantly cheaper compared to some parts of the U.S., where plans can cost an estimated $393 to $489 per month.
Be sure to consult with a tax professional if you have concerns about whether you can deduct medical expenses on your federal tax return.
Lastly, while Panama may have zero income tax on foreign-sourced income, the country still has what is essentially a 7% Value-Added Tax (VAT).
Is Panama still a tax haven?
Panama has faced controversy regarding its status as a tax haven in the past decade. However, these issues are generally unrelated to individual retirees.
What happened? A widely reported leak revealed files from a Panamanian firm, implicating some in fraud or foreign tax evasion regarding offshore financial activities. The firm’s founders were acquitted, and while tourism dipped following the so-called “Panama Papers” incident, the decline could have been due to several factors.
For example, Panama is considered a developed country in Latin America due to its growing infrastructure, but it still experiences intermittent power outages.
The fruits of living in Panama
Retiring in a new country can be challenging, but the spoils may be worth the work.
On a personal note, several years ago, I attended a travel agency video call where I saw some of what life in Panama has to offer. Retired couples were interviewed about their experience living in the country. They praised how straightforward life was, expressing how much easier it was to learn Spanish being surrounded by Spanish speakers. One couple seemed to enjoy the local fruit cart that brought them fresh produce every morning.
So, while the cost of living may be rising where you are, there may be prudence in considering a move. There are many places retirees tend to go — Hawaii, Florida, Italy, Canada, and Mexico. But don’t forget Panama.
After all, where else can you leave the U.S. and still be a part of American history?
Related Content
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

Kate is a CPA with experience in audit and technology. As a Tax Writer at Kiplinger, Kate believes that tax and finance news should meet people where they are today, across cultural, educational, and disciplinary backgrounds.
-
The Fall Garden 'Tax': What to Plant and How to Prepare
Tax Tips Fall gardening could increase your taxes this season. Here’s what to know while planting in 2025.
-
July CPI Report Boosts Rate-Cut Odds: What the Experts Say
The July CPI report shows that tariffs are having a slight impact on inflation, though not enough to keep the Fed from cutting interest rates.
-
The Fall Garden 'Tax': What to Plant and How to Prepare
Tax Tips Fall gardening could increase your taxes this season. Here’s what to know while planting in 2025.
-
Texas Sales Tax-Free Weekend 2025
Tax Holiday Here's what you needed to know about the Texas sales tax holiday.
-
Retirees Should Watch These Four Key Tax Changes in 2025
Tax Changes This year brings key tax changes that could affect your retirement taxes and income.
-
The Most Tax-Friendly State for Retirement in 2025: Here It Is
Retirement Tax How do you retire ‘tax-free’? This state doesn’t tax retirement income, has a low median property tax bill, and even offers savings on gas. Are you ready for a move?
-
Five Ways Trump’s 2025 Tax Bill Could Boost Your Tax Refund (or Shrink It)
Tax Refunds The tax code is changing again, and if you’re filing for 2025, Trump’s ‘big beautiful’ bill could mean a bigger refund, a smaller one or something in between next year. Here are five ways the new law could impact your bottom line.
-
New SALT Deduction Could Put Thousands Back in California Homeowners’ Pockets
Tax Breaks The federal state and local sales tax (SALT) deduction cap is higher this year, and could translate into bigger savings for Golden State homeowners.
-
Money for Your Kids? Three Ways Trump's ‘Big Beautiful Bill’ Impacts Your Child's Finances
Tax Tips The Trump tax bill could help your child with future education and homebuying costs. Here’s how.
-
Why Your Summer Budget Feels Tighter: Tariffs Push Up Inflation
Tariffs Your summer holiday just got more expensive, and tariffs are partially to blame, economists say.