If you are a U.S. Citizen, well, the U.S. Residency Calculator won’t be of any use to you. Lorraine and I, on the other hand, will have to be very careful about the number of days we spend in the United States.
When we first started planning out our retirement, we assumed we could be Canadian Snowbirds by just crossing the border to the U.S. in November and coming back to Canada in April. Enjoy moderate weather for twelve months of the year. Striking off one of my bucket list objectives for retirement: to never be cold again.
Perfect, eh? (Sorry about the Canadian stereotype.)
It turns out to be far more complicated than staying less than six months in the U.S. in any given year.
The substantial presence test, to avoid being considered a U.S. resident for tax purposes and goodness knows we already pay a ton of taxes in Canada, includes two very important points:
- Physically present in the U.S. for 31 days in the current year
- A three-year total of 183 days which includes all the days spent in the current year, one-third of the days spent in the preceding year and one-sixth of the days spent in the year prior.
That means only 120 days south a year to avoid being considered a U.S. resident for tax purposes. That means leaving in November and returning to Canada at the end of February. That means missing out on my bucket list objective to never be cold again.
February is cold in Canada. Very, very cold.
The U.S. Residency Calculator is helpful to determine whether you have to be a bit more formal in terms of staying in the U.S.
A Canadian can get an exemption by filing a Form 8840 with the IRS. This allows a Canadian snowbird to stay in the U.S. for up to 182 days every year without being considered a U.S. resident for tax purposes. To qualify, you have to be in the U.S. for less than 183 days in the current year, demonstrate a home in Canada in the current year (owner or renter) and establish a closer connection to Canada than the U.S. The latter can be demonstrated in terms of where you bank, pay taxes, keep your belongings, where your drivers license was issued amongst other things.
The 8840 form can be found on the IRS website here. The form should be filed before June 15 in the year after your 182 day stay in the U.S. although the Canadian Snowbird Association recommends proactively completing and filing a new 8840 each year and maintaining copies to indicate that you are entering the U.S. as a temporary visitor from Canada.
If a snowbird loses track of time and exceeds 183 days or more, then it is possible to file an exemption under the Canada – U.S. Tax Treaty. Sounds like a really complex process though which would require lawyers and fees. Best to keep it within 182 days. At least for now.
The Canadian Retiree Visa bill, H.R. 979: Promoting Tourism to Enhance our Economy Act of 2017, could see Canadian retirees being able to spend 8 months in the U.S. (owning real estate will not be required to obtain the visa). The bill has yet to pass but if it does, we will be applying for that visa. That said, every province in Canada has residency requirements to maintain health care coverage. In Ontario, we have to be physically present in the province for at least 153 days in any 12-month period. Not sure who is counting those days but I was somewhat surprised to learn that regardless of where you pay your taxes, you are a bit of a prisoner in your own province within Canada.
Who knew travelling in retirement could be so complicated?