November 6, 2018
Snowbirds be warned: Spending too much time in the U.S. can trigger double tax
If you spend your winters in the United States, you might be subject to paying U.S. taxes to the IRS. The common belief that spending 182 days or less makes you safe is wrong. The reality is that the IRS applies the Substantial Presence Test, which looks at a three-year period. If you overstay, you can apply for an exemption provided you meet the “closer connection” to Canada criteria and file the correct forms with the IRS before the deadline. Either way, you’ll want to watch your days spent in the U.S., or you might get hit with a hefty fine.
Key Takeaways:
- The Substantial Presence Test calculates the number of days over a three-year period that an individual spends in the U.S.
- To claim the closer connection exemption for 2017, Canadians must file IRS Form 8840 provided no exceptions apply.
- Planning to exit Canda for tax purposes should begin at least a year in advance to as it involves immigration, tax, estate, health care and other financial issues.
“It is important to understand the U.S. tax rules – and the actions snowbirds need to take to avoid being taxed south of the border.”