If you’re one of the many Durham Region and Ontario homeowners who spends part of the winter in the United States, there’s an IRS rule worth understanding before you finalize your travel plans.
Often referred to as the U.S. 183-day rule, the calculation isn’t quite as straightforward as simply counting how many days you spend south of the border in a single year.
The IRS uses a formula that considers your time in the United States over a three-year period. For Canadians who regularly spend their winters south, keeping track of those days can be an important part of planning ahead.
What Is the U.S. 183-Day Rule for Canadian Snowbirds?
The IRS uses what’s known as the Substantial Presence Test to determine whether someone may be considered a U.S. resident for tax purposes based on the amount of time they spend in the United States.
The calculation considers a three-year period and generally includes:
- All the days you were present in the U.S. during the current year
- One-third of the days you were present during the previous year
- One-sixth of the days you were present two years earlier
If the resulting total is 183 days or more, and you were physically present in the United States for at least 31 days during the current year, you may meet the Substantial Presence Test.
That’s why simply looking at how many days you spent in the U.S. this winter may not tell the whole story.
What Happens If You Meet the Substantial Presence Test?
Meeting the Substantial Presence Test doesn’t necessarily mean you’ll ultimately be treated as a U.S. resident for tax purposes.
Certain individuals may qualify for what’s known as the Closer Connection Exception.
Generally, this exception may be available if you were physically present in the United States for fewer than 183 days during the current year, maintained a tax home in a foreign country during the year, and can establish that you had a closer connection to that foreign country than to the United States.
There are additional eligibility requirements and individual circumstances that can affect whether the exception is available, so this isn’t simply a matter of counting days or completing a form.
Those claiming the exception are generally required to file IRS Form 8840, Closer Connection Exception Statement for Aliens.
Timely filing is important. According to the IRS, failing to file Form 8840 on time can affect your ability to claim the closer connection exception, subject to limited circumstances described by the IRS.
Because everyone’s circumstances are different, Canadians approaching these thresholds should consider speaking with a qualified cross-border tax professional.
What Should Canadian Snowbirds Keep in Mind?
Keep an Accurate Record of Your U.S. Travel Days
If spending part of every winter in the United States has become part of your routine, keep an accurate record of when you enter and leave the country.
Remember that the Substantial Presence Test looks beyond the current year. Your travel history from the previous two years is also part of the calculation.
Don’t Wait Until Tax Time to Think About It
If you regularly spend extended periods in the United States, understanding the rules before your next trip can be easier than trying to reconstruct several years of travel afterward.
A qualified cross-border tax professional can help determine how the rules apply to your particular circumstances and whether any filings may be required.
Consider the Bigger Picture as a Homeowner
For many Canadian snowbirds, spending several months away each year eventually becomes part of a broader lifestyle conversation.
Beyond tax and travel considerations, homeowners may also need to think about insurance requirements, home maintenance, security, property management and how their home fits into the lifestyle they want for the years ahead.
For homeowners in Pickering, Ajax, Whitby, Oshawa and across Durham Region, that doesn’t automatically mean it’s time to move.
For some, keeping the family home makes perfect sense. Others may eventually decide that a smaller property, condo, bungalow or lower-maintenance home better suits a lifestyle that includes spending several months away each year.
The important thing is understanding your options before you need to make a decision.
The Marticorena Group Perspective
Planning to spend more time outside Canada can involve more than booking flights and arranging for someone to check on the house. Tax considerations, travel timelines, insurance, home maintenance and what to do with your property while you’re away can all become part of the bigger picture.
While tax questions should always be reviewed with a qualified cross-border tax professional, my role is to help you think through the real estate side of those plans.
Whether you’re perfectly happy keeping your current home, considering something easier to maintain in the future, or simply wondering what your options might look like, I’m always happy to be a resource and help you understand the real estate side of the equation.
There doesn’t have to be an immediate plan to move. Sometimes understanding your options is simply part of planning ahead.
Key Takeaway
If you regularly spend winters in the United States, don’t rely on a rough estimate of how long you’ve been away.
Keep an accurate record of your U.S. travel days and remember that the IRS Substantial Presence Test considers time spent in the United States over a three-year period.
If your travel pattern puts you near the applicable thresholds, consider speaking with a qualified cross-border tax professional who can review your individual circumstances and advise you about any required filings.
Thinking About Your Home as Your Lifestyle Changes?
If spending more time away is changing how you think about your Durham Region home or your future real estate plans, I’m always happy to have a conversation.
Whether you’re staying exactly where you are, considering downsizing or right-sizing in the future, or simply wondering what your options might look like, we can talk through the real estate side of the equation without assuming that making a move is the right answer.
Julie Marticorena
The Marticorena Group
This article is provided for general informational purposes only and is not individualized tax, legal, financial or investment advice. U.S. and Canadian tax rules and individual circumstances vary. Consult a qualified cross-border tax professional regarding your specific situation.
Sources
- Internal Revenue Service: Substantial Presence Test
- Internal Revenue Service: Closer Connection Exception to the Substantial Presence Test
- Internal Revenue Service: Form 8840, Closer Connection Exception Statement for Aliens
