Must Know Tax Rules If You’re Heading South For the Winter

Written by Gwyneth James MBA CPA, CGAWell Traveled Luggage

A client gleefully informed me this week that he’s off to Florida for the winter. I took a minute to check when he’ll be back. There are 3 reasons for this: (1) US taxes, (2) OHIP, and (3) Canadian resident status.

  1. The Canadian and US governments have improved their tracking of traveller movements so carefully check your dates of entry and exit to US. Ensure you stay no longer than 182 days in a 12-month period or you will be subject to US taxes (Canadian citizens only; limit is 90 days for other countries’ residents and Canadian permanent residents).  However, IRS calculates the time spent by a snowbird in the States over the course of 3 consecutive years to assess whether you should be actually be classified as a “substantial presence” and subject to US taxation. Under that calculation, spending 182 days a year for 3 years in a row would put you over the limit.
    Snowbirds are advised to complete and file Form 8840 with the IRS (“Closer Connection Exception Statement for Aliens”). This should be filed every year you spend more than a couple of months in the US.
  2. Ontario requires at least five months of residence in the province to maintain OHIP coverage (i.e. you can be outside of Canada for a total of 212 days in any 12 month period).
  3. There is a chance that, if you stay away more than six months and have really settled in somewhere overseas, you can be deemed to have emigrated.  Canadians who lose their resident status are subject to departure tax – assets are considered to have been sold at fair market value and any gains are taxed.

More Information;

OHIP Coverage While Outside Canada
The Canadian Snowbird Association Travel Information Guide

Visit USA Act proposed to extend the length of stay limit for Canadian citizens over 50 years old, but that has not yet passed Congress.  Click here to read more.

If you established ties in a country that Canada has a tax treaty with and you are considered a resident of that country, but you are otherwise a factual resident of Canada, meaning you maintain significant residential ties with Canada, you may be considered a deemed non-resident of Canada.

Bon voyage!

Cody & James Chartered Professional Accountants