As the snow piles up in Canada, you may want to head to the sunny parts of the U.S. to escape the winter. This strategy, known as being a snowbird, is popular.
Post-pandemic, the number of Canadians traveling to the U.S. has steadily increased, with over 6 million trips made by Canadians to the U.S. in 2023 alone. And the number of people planning to head south shows no sign of stopping this winter. In a survey, The Canadian Snowbirds Association found that 87% of its members plan to go to the U.S. this year. Yes, the favourite destination seems to be Disney World in Orlando.
Canadian snowbirds have at least one thing in common with their avian counterparts — they head south for the winter. After enjoying the warmer months in Canada, they escape to a rental, timeshare, or second home, typically in the warmer states like Florida, Texas, South Carolina, or Arizona. It’s easy to see why, given that Canadian winters are brutally cold and snowy.
According to a report by the National Association of Realtors in 2022, Canadians are the top foreign purchasers of U.S. real estate, making up 11% of the foreign buyers purchasing real estate in America — which translates to $5.5 billion USD (roughly $7.4 billion CAD). Of those Canadian buyers, 45% purchased a home in Florida, and 58% of those intended to use their purchase as a vacation home.
However, while it’s common knowledge that Canadians can stay in the U.S. for up to six months at a time, it’s less commonly known that you might have to pay U.S. taxes. Many Snowbirds are unsure of the rules that apply to part-time U.S. residency. This blog is not meant to be a tax piece, but rather a brief outline as to what Canadians need to consider.
As a fact, many Canadian snowbirds find themselves unprepared for the tax consequences of spending winters south of the border. So if you’re thinking of trading your snow shovel for a beach umbrella, read on.
Do You Have to Pay U.S. Taxes in the First Six Months of Your Stay?
Canadians traveling to the U.S. can generally enter for up to six months without needing a visa. However, just because you can stay in the country without a visa for those months doesn’t mean the IRS won’t consider you a U.S. resident for tax purposes. It might seem odd, but you can stay in the U.S. long enough to owe taxes without changing your immigration status to resident.
This nuance in the law makes snowbirding a potential tax trap. There are two different rules, one for immigration and one for taxation.
So? How Long Can You Stay in the U.S. Before You Have to Pay Taxes?
Regardless of your intent or immigration status, you are considered a U.S. resident for tax purposes if you meet the IRS’s Substantial Presence Test. You need to calculate the number of days you stay in the US pursuant to the IRS test. Unfortunately most Snowbirds are frustrated with how complicated the calculation actually is. The Canadian Snowbird Association has quite a few excellent articles on the subject. In general, you have to determine how many days you have spent in the U.S. in the current calendar year, and the two previous calendar years. If you were present in the U.S. for at least 31 days in the current calendar year, and a grand total of 183 days when you include the current year and add it to one third and then one sixth of the previous two years, you are likely a resident for tax purposes and will owe taxes to the IRS (confused – speak to an accountant).
Lastly, if you have US pensions (like some hockey players) or US rental income, earnings, capital gains from any US property you purchased, etc. you will need to file a US return (and you must provide the information to CRA for its tabulation). Yes there are two things in life that we cannot escape – Death and Taxes. A good, competent accountant though, can make the latter a little more palatable.
Helping Snowbirds Injured Across North America
For over 40 years, we’ve been helping Canadians involved in car accidents and other personal injury incidents while traveling in the United States. Each year, millions of snowbirds-residents from Canada (and the northern U.S.A) – head south to escape the cold. Unfortunately, accidents happen. When they do we are here to help navigate the legal and insurance challenges that arise.
Cross Border Accidents and claims are very complicated!
Call the Free Snowbird Helpline 1-800-587-6992
Or Email – snowbirdaccidents@yahoo.com,
Or https://snowbirdaccidents.com/contact/
