US Tax for Canadian Snowbirds 

Canadian “snowbirds” who spend considerable time in the United States should be aware of potential U.S. income tax implications. The U.S. and Canadian governments track and share data on travelers crossing the border, which can affect tax obligations based on the duration and frequency of visits. 

Understanding the Substantial Presence Test (SPT): The SPT is a crucial factor in determining U.S. tax residency. It involves counting the days spent in the U.S. over a three-year period. To meet the SPT, you must be physically present in the U.S. for: 

• At least 31 days during the current year, and 
• A total of 183 days during a three-year period, including the current year and the two preceding years, counting: 
• All days in the current year, 
• One-third of the days in the first preceding year, 
• One-sixth of the days in the second preceding year. 

Example of SPT Calculation: Consider a scenario where you spent 100 days in the U.S. in 2023, 150 days in 2022, and 120 days in 2021. The cumulative count for SPT would be 170 days (100 + 50 + 20), which is less than the required 183 days. Therefore, you wouldn’t be considered a U.S. tax resident for 2023. 

Actions After Meeting the SPT: If you meet the SPT, you’re considered a U.S. tax resident and may need to file a U.S. income tax return with the IRS, reporting worldwide income. However, there are two exceptions: 

• Closer Connection Exception: 
• Applicable if you spend less than 183 days in the U.S. in the current year and have stronger ties to another country (e.g., Canada). 
• File U.S. Form 8840 by June 15 of the following year to maintain non-resident status for U.S. tax purposes. 
• Treaty “Tie-Breaker” Rules Exemption: 
• Relevant if you spend 183 days or more in the U.S. in the current year and are a Canadian tax resident. 
• Refer to the United States-Canada Income Tax Convention and file U.S. Form 1040-NR and Form 8833 by June 15 of the following year. 

Consequences of Non-Compliance: Failing to file the required forms can lead to being considered a U.S. resident for tax purposes, subject to U.S. income tax on worldwide income, and potential penalties. 

Summary: It’s vital to monitor your days in the U.S. to understand and comply with U.S. tax requirements. While there are exceptions to mitigate U.S. income tax exposure, non-compliance can result in penalties. Consult a tax advisor for personalized advice and before implementing any tax planning strategies. 

This information is not intended as specific financial, investment, foreign, or domestic taxation, legal, accounting, or professional advice and should not replace independent professional advice.