New U.S. tax laws could ground Canadian snowbirds
In the aftermath of recent changes to U.S. estate tax laws, an MSN Money report warns that extended stays south of the border may have financial implications for Canadians.
While the general rule has been that stays of four months or less have been exempt from U.S. taxation, recently introduced regulations may require a calculator, and a legal advisor, to sort it all out.
The complicated new formula uses the sum of the following to determine taxability:
- The sum of all days spent in the U.S. during the current year;
- PLUS one-third of all days spent in the U.S. during the previous year;
- PLUS one-sixth of all days spent in the U.S. during the year before that.
Canadians whose total reaches 183 days or more may be required to pay U.S. taxes, unless they have filed Form 8840 with the United States Internal Revenue Service (IRS), which proves Canadian tax and residency responsibilities.
However, according to the Canadian Snowbird Association, you should also be ready to prove that you can sustain yourself during your extended stay.
The association suggests carrying copies of the following documents when crossing the border:
- Canadian driver’s license;
- Credit card statements;
- Tax assessment notices;
- Bank and investment statements;
- Homeowner documents;
- A return ticket;
- Travel insurance policy.
As a non-resident, the rules get even more complicated if you earn any income in the U.S., which can include:
- Gambling earnings;
- Lottery winnings;
- Rental income.
In short, if you even wonder if your situation applies, you should consult with a tax expert to ensure that you remain on the safe side of the IRS.
Edited on 17 August 2017