The Finance Blogger

Snow Birds and US Tax Issues

Snow Birds and US tax issuesIn our last post we talked a little about tax issues for snow birds from Canada. These are people who spend a lot of time in the US to get away from the Canadian cold winters. Typically they will leave in Nov and return in April. They are spending as much as 180 days in the US enjoying the southern climate and warm temperatures that the US has to offer. The term snow birds also includes people who spend as little as one month in the US as well. So it is really anyone who heads south for some part of the winter.

The IRS has developed definitions and tests for assessing people in terms of residency. Most importantly whether they would qualify to pay taxes or not. Although it appears most Canadian snow birds would not fall under these definitions. It is a good idea to become aware of these tests. Make sure that you have taken the steps necessary to not qualify as a resident alien in the United States. The thing that many Canadians fail to think about is that once you are in the United states or any other country for that matter, you fall under their laws. It really does not matter whether you are Canadian or not.

Rules for Snow Birds

The following outlines the substantial presence test that the IRS applies:

  • If you were in the United States for 183 days or more in the current year, you meet the substantial presence test and are considered a resident alien of the United States.
  • If you were in the United States for between 31 and 182 days in the current year, you may meet the substantial presence test.
  • You were in the United States for less than 31 days in the current year, you don’t meet the substantial presence test, and are considered a non-resident alien of the United States.

Demonstrating a Closer Connection

Demonstrating that you are not a resident alien can be accomplished in a number of ways providing that you are prepared. Here are a few that seem to qualify:

  • Your tax home is in Canada. If you are not employed or self-employed, your tax home is where you regularly live, as shown by owning or renting a house, condo, apartment, or furnished room. Your Canadian home must be available to you continuously throughout the year at all times, and not just for the period that you are not in the United States.
  • If you are employed or self-employed, your tax home is the location of your principal place of business or employment, regardless of where you maintain your family home.
  • You had a closer connection to Canada than to the United States during the current year. Various factors demonstrate that you maintain more significant ties to Canada than the United States. These factors include the location of the following:
    • your permanent residence
    • your family
    • location of personal belongings, such as cars, furniture, clothing, and jewelry
    • your bank
    • where you carry on business (if applicable)
    • social, cultural, religious, or political organizations to which you belong or in which you participate
    • the jurisdiction where you vote
    • the jurisdiction where you hold a driver’s license.

If you are concerned about this issue or are being assessed as a resident alien, it is time to seek out an expert. Someone who can assess the details of your situation and outline what you need to do. This post is just a rough guideline. It should be considered an outline of the issue facing snow birds who are dealing with US tax issues.

Comments are welcome.


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