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Snowbirds: What to Know About U.S. Taxes While Escaping the Cold
As Canadians escape the winter chill for sunnier U.S. destinations, the trend of snowbirding has surged, with over 6 million trips to the U.S. in 2022. While it’s widely understood that Canadians can stay in the U.S. for up to six months without a visa, many are unaware of the potential U.S. tax implications.
What Is a Snowbird?
Snowbirds are Canadians who migrate to warmer U.S. states like Florida or Arizona during the winter months. After enjoying the Canadian summer, they spend the colder months in rental properties, timeshares, or second homes. This lifestyle is appealing due to Canada’s harsh winter weather. However, snowbirds often find themselves unprepared for the tax responsibilities that come with extended stays in the U.S.
Tax Implications of a Six-Month Stay
Canadians can stay in the U.S. for up to six months without a visa. However, this does not automatically exempt them from U.S. tax obligations. The IRS may consider you a U.S. resident for tax purposes if you spend enough time there, even if your immigration status remains unchanged.
Glenda Lambert, a Canadian snowbird and administrator of the "Canadian Snowbirds Information and Discussion Group" on Facebook, highlights the confusion around tax rules. “Many people think they can stay for six months in a calendar year,” Lambert explains. “But the rule is actually based on a rolling 12-month period.”
How to Determine Tax Residency
To avoid unexpected tax issues, understand the IRS’s Substantial Presence Test, which determines your tax residency based on your stay in the U.S. Here’s how to calculate it:
- Count the Days: Track the total number of days you’ve spent in the U.S. this year, the previous year, and the year before that. Half-days also count as full days.
- Apply the Formula: Add all the days you’ve spent in the U.S. in the current year. Include one-third of the days from the previous year and one-sixth from two years ago.
- Check the Threshold: If you’ve been in the U.S. for at least 31 days this year and the total of these calculations equals 183 days or more, you are likely considered a U.S. tax resident and may owe taxes.
Jack Liu, a senior estate planning consultant, advises snowbirds to carefully track their days to avoid tax complications. “Accurate calculations are crucial to avoid issues with the IRS,” Liu notes.
By understanding these rules and planning your stay accordingly, you can enjoy your time in the U.S. without unexpected tax consequences.
