Tax Services Toronto | Snowbirds Taxes | Canadian retirees who fly south for the winter need to aware of the Canadian and U.S. tax implications of doing so.

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Snowbirds Taxes

Canadian retirees who fly south for the winter need to aware of the Canadian and U.S. tax implications of doing so.

If a Canadian spends 183 days or more in the U.S., they can be considered “substantially present in the U.S.” and are subject to U.S. tax laws.

Things become even more complicated if the following applies to you:
Add up the following:

  • All days in the U.S. in tax year in question

  • One-third of the days you spent in the U.S. in preceding tax year

  • One-sixth of the days you spent in the U.S. in second preceding tax year


A new tax treaty between the two went into effect during the 2014 tax year that allows them to share information relating to how many days Canadians stay in each country.

It will help both agencies to implement some new rules and strictly enforce the old rules.

Many snowbirds know the old rule as what has been termed “the 183 day rule” - 183 days or more is the amount of time that a Canadian can spend in the U.S. before they are considered “substantially present in the U.S.” and are subject to U.S. tax laws.

But it’s not that simple.

Canadians who were in the United States for more than 30 days in 2014 - according to tax logic – may have been there longer. Here’s the formula the taxman uses to determine how long you were in the states last year if you spent more than 30 days south of the border ….

Add up the following:

  • All days in the U.S. in 2014

  • One-third of the days you spent in the U.S. in 2013

  • One-sixth of the days you spent in the U.S. in 2012.

If the total of the three equals 183 or more, the IRS may require you to file a U.S. tax return.

To counter this, you can file a Form 8840 – “Closer Connection Exception Statement for Aliens” which signifies your closer connection to another country. For example, snowbirds have closer connections to Canada by having a permanent home, personal belongings, family, driver’s licenses, and voting rights in Canada. This form needs to be filed each year that you plan to spend time in the U.S..

This can be a very complicated area and will require the assistance of a professional who is familiar with cross-border issues.

 

 
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Tax Services Toronto | Snowbirds Taxes | Canadian retirees who fly south for the winter need to aware of the Canadian and U.S. tax implications of doing so.