The Canadian Snowbird

By Bryant Andrus

Profile: The Canadian Snowbird

TL;DR

The Canadian Snowbird Association estimates the number of Canadians heading south has fallen 15% to 20%, and those still going face closer attention at the border and a Canadian dollar near 71 US cents.
The IRS Substantial Presence Test can make you a US tax resident well inside the 182-day immigration limit, which is why Form 8840 matters.
Before you leave, count your days, confirm last year’s Form 8840, register if you’ll stay 30 days or longer, and set your currency plan.

If you are packing for a winter in Arizona, Florida, or Texas, you may be traveling with a smaller crowd than usual. The Canadian Snowbird Association estimates the number of Canadians heading south has fallen by 15% to 20% since relations with the United States turned hostile. For those who are still going, this season comes with closer attention at the border, a stubbornly weak Canadian dollar, and a tax rule that runs on arithmetic rather than intentions.

Two Different Clocks

Snowbirds are governed by two day-counting systems that do not match. The immigration rule generally limits a visitor to about six months, or 182 days, in the United States. The tax rule, the IRS Substantial Presence Test, counts every day in the current year, plus one-third of last year’s days, plus one-sixth of the year before, and treats you as a US tax resident at 183 weighted days. A Canadian who spends 122 days in the US in each of three straight years, well inside the immigration limit, lands at exactly 183. Any part of a day counts as a day.

The protection is Form 8840, the Closer Connection Exception, which lets you show that your ties are to Canada. It is generally due by June 15 of the following year if you have no other US return to file, and the IRS cautions that missing the deadline can forfeit the protection. A related issue is drawing attention this season: Canadians arriving by land who plan to stay in the US 30 days or longer generally need to register online with US immigration. On October 8, the CSA reminded members of the requirement, and Ottawa continues to warn travelers to expect extra scrutiny at the border. Registration documents how long you have been in the country, so your travel records, your registration, and your tax filings all need to line up.

The Dollar and the Rates

The Canadian dollar was trading near 71 US cents when the Bank of Canada raised its overnight rate by a quarter point to 2.5% on October 28. The US Federal Reserve had raised its own target range to 3.75%–4% in September. At 71 cents, every US$1,000 of Florida or Arizona spending costs about C$1,410. Interest rate moves in both countries and the ongoing trade fight keep pushing the exchange rate around, and nobody can reliably forecast it. What you can control is deciding how you will fund your US spending before you leave, rather than reacting to the rate every time you need cash.

On the Horizon

Two events are worth watching over the next few days: the US midterm elections on November 3, where tariffs on Canada have become a political issue and the two governments are reportedly negotiating limited relief on steel and auto duties, and Canada’s federal budget on November 5. We will cover anything in either that touches cross-border households in next month’s issue.

What to Do Before You Leave

First, count your days. Pull your US entries and exits for this year and the previous two (the I-94 travel history on the US Customs and Border Protection website is a good starting point) and calculate your weighted total before you book your return. Second, confirm that Form 8840 was filed for last year and put this year’s deadline on your calendar. Third, if you plan to stay 30 days or longer, find out whether you need to register and keep proof that you did.

Fourth, set your currency plan, and check that your provincial health coverage rules, which set minimum-presence requirements that vary by province, and your travel insurance fit your planned dates.

Ready to Talk?

Cross-border planning is time-sensitive and highly fact-specific. If any of the topics in this issue apply to your situation, we would welcome the conversation. State Bird Corp specializes in US–Canada cross-border tax, estate, and immigration planning for families and businesses on both sides of the border. Our team works with clients across the US and Canada — wherever your cross-border life takes you.

Sources

Sincerely,

The State Bird Corp Team

State Bird Corp

P: (602) 641-5996 · E: Info@statebirdcorp.com · W: statebirdcorp.com

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State Bird Corp is a management and financial consulting firm. State Bird Corp is not an accounting, legal or investment advisory firm. Cross-border planning is highly fact-specific. The strategies and topics described are general in nature, and readers should consult qualified specialists before taking any action. Any recommendation, inferences, or other guidance contained herein is meant for educational or general purposes and should not be relayed upon as specific advice for any person or business. Consult your legal, tax, and investment advisor for specific recommendation to your situation.