Snowbirds traveling south tax free

Many retirees become snowbirds to escape the harsh winters in Canada with an extended stay in the Southern United States. If you’re one, you need to know there can be meaningful tax consequences relating to part time residency.

For example, US authorities may apply what is known as the ‘Substantial Presence’ test. Click on the following link for the web site:-

Substantial Presence Test

For any given year, it notes the number of days you spend in the US in the current year, plus 1/3 of the days you spent in the US last year, plus 1/6 of the days you spent in the US two years ago. 

This total must not add up to more than 182. If you always spend 121 days (about four months) or less in the US annually, then you will never reach the 182 number that will indicate substantial presence which in turn could make you subject to US tax.

If you exceed 182 you can still be treated as a non-resident alien and not be subject to US tax. To qualify you must file form 8840 – the ‘Closer Connection Exception Statement for Aliens’ to establish a closer connection to a foreign country and maintain your non-resident alien status.

Click on the following link for the web site:-

Closer Connection Exception Statement

The form must be filed on or before June 15th of the year following the year you exceeded 182 in the closer connection calculation.

If this form is not filed in a timely manner, the right to claim the exception for that tax year might be lost. You could then be deemed a resident of the United States and would be required to file a tax return and declare your worldwide income.

So, if you are a snowbird, keep current with this test and paperwork. Don’t get tangled up in Uncle Sam’s taxation system if you don’t need to!

More on 'closer connection' and the calculation