The following is an excerpt from our colleague, Iain Fleming, over at Great West Life. In his recent issue of The Monday Morning Muse, he has assembled an eye opening list of what to watch out for – if you spend your winters south of the border.
“With one week of winter left, many snowbirds are beginning to migrate back
to Canada. Most are returning to Canada to enjoy the warmer weather but
some may be returning because they have to. With a new cross-border
agreement in place that allows the IRS to track the exact amount of time
Canadians spend in the US, snowbirds must now be diligent in ensuring they
don’t overstay their welcome. This week’s Muse offers a look into the
current rules and provides tips on avoiding a painful tax hit from the IRS.”
- In 2014 the US and Canada implemented an agreement to scan passports and share information
- The IRS can now accurately track exactly how many days Canadians are spending in the US and vice-versa
- Should a Canadian spend more than 182 days south of the border, he or she risks considerable tax consequences
- Snowbirds who spend more than 182 in the United States risk becoming US residents for tax purposes
This results in the creation of a US claim on their worldwide income and could potentially mean a 5-year ban from the country and the loss of free Canadian healthcare.
Also, those who spend more than 120 days per year in the US over a three year span may meet the IRS’ ‘substantial presence’ test, which could also lead to the consequences above.
Since more than 500,000 Canadians own real estate in Florida alone, it is important that financial advisors in Canada offer sound advice to their snowbird clients.