@LiveinCostaRica (Christopher Howard) wrote an excellent post below explaining the tax benefits of living in Costa Rica or offshore in general. 

There are many financial benefits to making your home in a convenient and safe neighboring country. There are many choices, however, Costa Rica provides a high standard of living for costs far below those in the U.S., Canada, or Europe. The cost of living benefits to individuals varies according to your lifestyle and the tax benefits are significant. 

Recently I gathered some statistics about Tax-unfriendly states for retirees in the U.S. California leads the list. The Golden state is a retiree’s tax nightmare. Although Social Security benefits are exempt from state income taxes, all other forms of retirement income are fully taxed. Californians pay some of the highest income taxes in the U.S. State and local sales taxes can reach 10.5% in some cities and towns, although food and prescription drugs are exempt. Real estate is assessed at 100% of cash value, but taxes are capped at 1% of value. In Rhode Island Social Security benefits are taxed just like they are by the federal government. Rhode Island attacks virtually all other sources of retirement income, too. Starting this year, capital gains are taxed as ordinary income, eliminating the lower capital-gains rate in effect before 2010.