Helpful Tips For Canadian Snowbirds Retiring South of The Border

by Susan Quilty on March 28, 2011

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Whether it is a permanent stay or just a winter get-away, many Canadians find themselves enjoying retirement south of the border.

Canadian retirees often seek warmer climates by taking extended vacations south of the border in many different areas of the United States. While this may be a great way to enjoy the best of both countries, it is important that you understand how each country’s rules will apply to your situation.

The following is an overview designed to help you plan your extended vacations, however it should not substitute for getting information from official government sources. Links throughout the article will help you find some helpful U.S. and Canadian resources.

1. Entry and Exit Requirements

Though Canada and the United States are friendly neighbors, there are several rules and requirements for passing in and out of each country. This is particularly true for Canadians who take extended vacations in the United States. These requirements are subject to change at any time, so you should always check for up-to-date information before each trip. You can find more information online with Foreign Affairs and International Trade Canada’s Travel Report for the U.S.

The travel documentation you will need when crossing the border depends on your mode of transit. There are different requirements for traveling by land, air or water. There is a U.S. law known as the Western Hemisphere Travel Initiative (WHTI) which requires visitors to present a valid passport, or other accepted form of identification when entering the United States. You can read more about WHTI requirements by visiting the Canada Border Services Agency online.

At the end of your extended vacation, you will also need certain documentation when you return home to Canada. The requirements for Canadians returning home can also be found online or by contacting the Canada Border Services Agency.

2. Security Screening

The U.S. Department of Homeland Security has tightened border security, and this affects many aspects of travel. When traveling into the United States, you, and your possessions, may be subject to search, particularly when flying. For tips on how to travel into the U.S. safely, you can find advice for travelers online through the U.S. Transportation Security Administration (TSA). This will also help you understand what procedures to expect when passing through security checkpoints.

3. U.S. Tax Laws for Canadian Snowbirds

Canada allows residents to vacation in the United States for up to six months, and extensions may be possible if you apply through your nearest U.S. Citizenship and Immigration Office during your stay. However, Canadian snowbirds have to be careful if they want to avoid being liable to pay U.S. taxes while in the country.

The U.S. Internal Revenue Service (IRS) uses a “substantial presence” test to determine if the length of your visits requires that you pay U.S. taxes. To check for a “substantial presence”: Add the number of days visited during the current calendar year, plus 1/3 of the days visited in the previous year, and 1/6 of the days visited in the year before that. If the total is more than 182 days, you will be required to file Form 8840 with the IRS.

Consider the following example: a Canadian couple visited the United States for 130 days in 2010, 120 days in 2009, and 120 days in 2008. They would add 130 days, plus 40 days (1/3 of 120), plus 20 days (1/6 of 120 days) for a total of 190 days. Since this is more than 182 days, the couple would have a “substantial presence” and need to file Form 8840.

Before you get nervous, know that filing Form 8840 with the IRS does not necessarily mean that you will have to pay U.S. taxes. Canadians who meet the requirements for a “substantial presence” will be considered U.S. residents for tax purposes, and must file with the IRS. However, Canadian snowbirds often qualify for a Closer Connection Exemption, which means they will not have to pay U.S. taxes.

If you are a Canadian snowbird who does not want to pay U.S. income taxes, or hefty fines, you should visit the IRS website and learn more about the substantial presence test and Closer Connection Exemption. Make sure you understand how the rules apply in your situation, because ignorance of the law will not prevent the IRS from holding you liable for unpaid taxes.

4. Learning from Other Snowbirds

Canadians who spend extended vacations south of the border will avoid problems and have a much more enjoyable experience if they take the time to understand the applicable laws and get some advice from fellow snowbirds. Whether you are new to wintering in the U.S. or a seasoned snowbird, you will find a wealth of information by joining the Canadian Snowbird Association.

Please feel free to also share your experiences as a Canadian Snowbird in the comments below.

{ 5 comments… read them below or add one }

db August 3, 2011 at 9:38 am

The more laws and filing and taxes they want from Companies and Snowbirds, the less they will get our business. There are many other countries that want our money so the USA should think before they complicate our stays.
The worst thing the USA can do now is to force both companies and visitors to pay more taxes! What are they thinking???

Reply

Dale A. Walters November 19, 2011 at 3:48 pm

Canadians moving to the US for a few months a year is pretty straight forward. The biggest confusion is around the days that can be spent in the US. Yes, people can quote the rules, but have problem implementing them in real life. The problems arise from the fact that the IRS and USCIS (Customs and Immigration) have different rules.

What is worse is the poor advice Canadians receive on the advisability of moving to the US full-time. It is generally to their benefit, financially speaking, to move to the US. Advisers tell them that because of the deemed disposition, US estate tax, etc. that it is not a good idea. This is almost always wrong and due to the advisers incomplete understanding of the laws.

The US is Canada’s best tax haven. A typical Canadian can save about 1/3 on their annual income tax bill. The wealthier the Canadian is, the bigger the benefit.

Reply

Dan krikau November 21, 2011 at 12:03 pm

Good morning. We are planning to purchase CBS home in Florida in a 55 plus community. Our strata or amenity fees are 499.00 monthly. What tax and other governance apply to our house purchase.? I am also interested what is required if we decide to live 8 months of each year in Florida.? Thank you. Dan

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Dave & Dorothy March 12, 2013 at 3:29 pm

My husband and I are planning on retiring in the states. Immigration sounds almost impossible, never mind our health care.
I have the question as well, what if we want to stay longer than the 6 months?
Does the states allow for this, and will our healthcare be cancelled if we stay longer?

Are other countries as harsh to get permanent residence (regarding citizinship)?

Thank you

Reply

Edward Foster May 14, 2013 at 10:43 am

Hi. Both my wife and I are retired and have been looking to relocate to a warmer climate as a permenant place to live. Place of choice is Florida. We are looking to purchase a permanent dwelling there for our own use but maintain some sort of living arangements back in Canada due to the fact our family live here. Is this possible or do we only have a certain amount of time to stay in the states before we would have to return back to Canada or some other country. We are looking to buy a single family dwelling or a 55 plus dwelling in a gated comunity. Could you please advise us as to what we are permitted to do and what we are not able to do.
In the meantime we are not looking for work, we are both retired with pensions.
Thank you in advance.

Reply

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