Do US citizens living in Costa Rica pay taxes?

Yes, both. US citizens are taxed on worldwide income wherever they live, so a Costa Rica move does not end the IRS relationship. Costa Rica taxes residents only on Costa Rica-sourced income (territorial system), which is favourable for retirees: US Social Security, US pensions, and US investment income are not taxed by Costa Rica, only by the US. US-side mitigants: the Foreign Earned Income Exclusion ($130,000 for 2026, earned income only) and the Foreign Tax Credit (offsets US tax against any tax paid to Costa Rica). Costa Rica side: 13 percent IVA (VAT) on most goods and services, low property tax (around 0.25 percent of declared value annually), import duties of 50 to 80 percent on cars, mandatory Caja contributions (7 to 11 percent of declared income) once residency is enrolled. The structures are complex enough that a CPA familiar with both systems is worth the fee. For the cost context, see our Costa Rica cost of living page.