183 Day Rule

Do you migrate south to avoid the cold, harsh Canadian winters?

As a snowbird, there are numerous United States tax policies that you should be aware of. If you are not mindful of these tax regulations, you could be responsible for paying U.S. income tax or face penalties for not filing a U.S. tax return. The amount of time you spend in the U.S. could also have implications on your eligibility for Canadian health care.

The most significant rule that applies to Canadians escaping the cold in the U.S. is the 183-Day rule. You will be considered U.S. resident for tax purposes if you meet the Internal Revenue Service`s substantial presence test for a given year.

What is the 183-Day Rule and the substantial presence test?

According to the IRS, you will be considered a U.S. resident for tax purposes if you meet the substantial presence test for the calendar year. To meet this test, you must be physically present in the United States on at least:

  1. 31 days during the current year, and
  2. 183 days during the 3-year period that includes the current year and the 2 years immediately before that, counting:
    • All the days you were present in the current year, and
    • 1/3 of the days you were present in the first year before the current year, and
    • 1/6 of the days you were present in the second year before the current year.

Example:

You were physically present in the United States on 120 days in each of the years 2010, 2011, and 2012. To determine if you meet the substantial presence test for 2012, count the full 120 days of presence in 2012, 40 days in 2011 (1/3 of 120), and 20 days in 2010 (1/6 of 120). Since the total for the 3-year period is 180 days, you are not considered a resident under the substantial presence test for 2012.
If you have any concerns about your tax situation, be sure to contact Canada Retirement. Our tax department will help clarify any concerns you may have about your tax situation and help you keep as much money as possible.

http://www.irs.gov/Individuals/International-Taxpayers/Substantial-Presence-Test

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