Taking a long trip to the U.S.? Avoid tax headaches
Are you a snowbird? Do you like to head south for the winter? If so, you should probably know that Canadian and American customs officers are using a new tool to control how long you stay south of the border.
Since July 30, 2014, pursuant to a cooperative agreement, Canada and the United States have been sharing information about when exactly a person enters and leaves either country.
So it's very important to know how to calculate the number of days you're allowed to visit our neighbours to the south-otherwise, you may be considered an American resident for tax purposes!
Whether you're there as a tenant or a property owner, you're considered an American resident if you stay there for 183 days, according to the following formula:
- At least 31 days in the current year AND 183 days over a 3-year period, weighted as follows:
- All days in the U.S. during the current year and
- 1/3 of the days in the U.S. during the previous year and
- 1/6 of the days in the U.S. during the year before that
To avoid being considered an American resident, despite a prolonged stay in the United States:
- Trips to the United States must not exceed 183 days per year (cumulatively and according to the above weighting) AND
- You must maintain a principal residence in Canada and have familial, economic, personal and social associations in Canada.
To prove the above, you must submit Form 8840 every year and no later than the deadline for filing a U.S. tax return (June 15).
If you stay for longer than 183 days in the same year, in order to benefit from the advantages of the tax treaty between Canada and the United States, you must file an American tax return (Form 1040NR) and invoke clause IV of the Treaty by submitting Form 8833 - Treaty-Based Return Position Disclosure.
The penalties for not respecting these conditions may be quite severe. If you find all of this confusing, you're not alone! That's why we recommend that you consult official resources and Canadian and U.S. government sites to get the information that applies to your particular situation.