Travel Blog

Snowbirds Taxed

Canadians traveling to the US and other countries need to understand the rules when they are out of the country to avoid having to pay a lot more tax than they should. Snowbirds taxed at higher rates make investments very risky as a result.  Here is what we have found and will update this as time goes on and more information becomes available.

Snowbirds Taxed – Substantial Presence Test

To meet the substantial presence test, you must have been physically present in the United States on at least:

  1. 31 days during the current year, and
  2. 183 days during the 3 year period that includes the current year and the 2 years immediately before. To satisfy the 183 days requirement, count:
    • All of the days you were present in the current year, and
    • One-third of the days you were present in the first year before the current year, and
    • One-sixth of the days you were present in the second year before the current year.

Here is the link

The page was last updated Dec 19,2012

Current Ontario Rules

Current Ontario rules allow 212 days out of province per year for Ontario with no consequences

US rules allow 182 days per year with a 3 year average of 120 days without need for visa or consequences

Read below for proposed changes and tax consequences within the USA. No real consequences regarding tax for Canadians who over stay just loss of benefits.

***** *A proposed travel law going through the U.S. Senate could have serious tax consequences for Canadian snowbirds, experts say.

* * * *The good news is that the JOLT Act, (Jobs Originated through Launching Travel), would allow Canadian retirees to spend up to eight months, or 240 days, each year in the U.S. without a visa. That’s almost two months longer than the current 182-day annual limit. The bad news is that snowbirds who spend that long in the U.S. may be required to pay U.S. taxes.

“It looks like a great deal. I can be in Palm Springs for 240 days., but they didn’t tell you that it comes with a very high tax cost,” Roy Berg, international tax lawyer at Moodys Gartner Tax Law in Calgary, said in an interview.

The changes, part of a U.S. immigration reform bill introduced in the Senate on April 15, are likely to become law, but it is not clear when they would take effect, observers say.

Would-be holders of the so-called Snowbird or Canadian retiree visa could become subject to U.S. income tax and estate tax, “and would, therefore, inadvertently light the fuse on the Snowbird Visa tax bomb,” Berg wrote in a recent article.

US Travel Rules

Under the current rules, those who spend more than 182 days out of 365 days in the calendar year, or more than 120 days per year on average over a three-year period, may be considered a U.S. resident for tax purposes.

The U.S. also imposes an estate tax on the value of certain individuals’ worldwide assets owned at death, Berg said. The estate tax could take effect even for someone who lives in the U.S. for a brief time, depending on the circumstances.

Kevin Nightingale, partner at tax consulting firm MNP, a specialist in U.S. and Canadian tax, agrees that the consequences may be serious.

“Canadians who are going to take advantage of these provisions have to be careful because if they stay in the U.S. for long amounts of time, they will be treated as U.S. residents for tax purposes,” Nightingale said.

Staying out of the country for more than 212 days can also put eligibility for health insurance at risk in Ontario, he added.

Form 8840

Snowbirds are typically advised to file a Form 8840, Closer Connection Exception statement with the U.S. Internal Revenue Service, said Michael MacKenzie, executive director of the Canadian Snowbird Association, which has about 75,000 members.

“Regular snow birds are very aware of the tax consequences with respect to the current situation. So I’m quite confident they would understand there would be an issue if they spent longer in the U.S.,” MacKenzie said.

He said that the association has been in discussions with U.S. lawmakers to ensure that tax changes would follow the proposed visa changes.

The aim of the bill is to boost the travel industry, which currently employs about one in eight Americans.

The expanded visa would be eligible to Canadian citizens who are age 55 or older, have a residence in Canada, own or rent a residence in the U.S. They will not work or seek social assistance benefits during their stay in the U.S.

Those who are outside of Ontario for more than 212 days in a 12-month period because they are studying, working, vacationing, or doing missionary work, can apply for continuous OHIP eligibility.

The Canadian Snowbird Association estimates that there are over 500,000 Canadians that spend the winter in Florida each year. It defines snowbirds as those spending 31 nights or more in a southern destination.

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