Taxation Issues that Snowbirds Need to be Aware of
It’s November and that means Snowbirds are on the move again to Florida, Arizona, California and Texas to name a few of the favorite spots. People who spend part of the year in the United States, but ordinarily reside in Canada must take caution to ensure they are not spending too much time in the U.S., which could potentially deem them a non-resident of Canada and deem them a U.S. resident for tax purposes.
Canada and the U.S. both have “substantial presence” tests that can deem a normally non-resident individual to be a resident of that country for tax purposes. Canadian taxation and benefits are based on residency and U.S. taxation and benefits are based on residency as well as citizenship. This could have important tax implications for an individual and their families.
Immigration rules and tax rules are very different: Immigration time tests run on a rolling 12-month period; whereas tax tests are on a calendar year basis. An individual will be considered a U.S. resident for tax purposes if they meet the substantial presence test for the calendar year. To meet this test, they must be physically present in the United States for 183 days in the current year or 183 days over a three-year period.. Meeting the test in the current year could mean the taxpayer may have U.S. immigration issues as well.
The new border tracking systems that are currently in place allow both Canada and the U.S. to track the amount of time a person spends inside and outside each country. As mentioned in a recent article by CBC, Canada and the U.S. will be using this information to determine an individual’s residency and, in turn, eligibility for various tax benefits and credits only available to residents of the particular country. Because of this, it is now more important to accurately track your time away from your country of residence and be aware of potential foreign filing requirements that may exist in the non-resident country so you don’t fall into unexpected trouble.
More information on all these rules please contact me at 403-457-4142 or send me an email at sgreenleyardentwealth.ca