Retiring Abroad: How Much Time Can a Canadian Spend in the US?
Milestone Wealth Management Ltd. - Mar 09, 2021
For Canadians who want to retire in a warmer climate for part of the year, the United States is by far the most popular choice. With prime locations such as California, Arizona and Florida, the US offers snowbirds great choices to enjoy their
For Canadians who want to retire in a warmer climate for part of the year, the United States is by far the most popular choice. With prime locations such as California, Arizona and Florida, the US offers snowbirds great choices to enjoy their retirement. However, one key question is: how long can a Canadian spend in the US each year? There is not one correct answer to that question, but in general, there are two main categories to consider: health care and taxes.
Regarding health care, it is important for Canadian snowbirds to ensure that they preserve their provincial health care coverage. Each province has their own guidelines, but most provinces (including Alberta) allow a resident to be out of the province for up to seven months (212 days for Alberta) and still retain their provincial health coverage. Keep in mind that this includes time outside of the province even when traveling within Canada, so make sure that you count all of your time outside of your province of residence (please see our prior post regarding travel insurance while outside of your home province). In the case of Alberta, even though you can be out of province for a total of 212 days in a year, when leaving the country, you must be gone for less than six consecutive months. Therefore, from the health care perspective, you could spend up to six consecutive months out of country and a total of roughly seven months out of province and still retain health care.
The other very important consideration is taxes (please see our recent blog post on tax consequences of retiring outside of Canada). If a snowbird wishes to spend part of the year in the US, it is very important that they understand their rules so that they are not deemed to be a resident of the US for tax purposes. In general, the US uses a specific formula to determine if you are a resident for tax purposes: the amount of days you spent in the US in the current year PLUS 1/3 of the days you spent last year PLUS 1/6 of the days you spent in the US the previous year – if the total days is 183 or more, you may be considered a resident of the US, and therefore have to file a US tax return and may be subject to taxes. If you do the math on that, you will see that if a Canadian spends 120 days each year, they should be ok. To illustrate, if a person spent 120 days each year for the past three years, the calculation would be 120 (this year) + 40 (1/3 of last year) + 20 (1/6 of the previous year) = 180.
However, what happens if you spend more than that calculated number of days (either intentionally or accidentally)? There actually is a mechanism where you can argue that you are still not a US resident for tax purposes. There is an exemption that can be filed with the US IRS called the Closer Connection Exception (providing you have not spent more than 183 days in the US in that particular year) in which you answer a series of questions that may show that you have much closer ties to Canada than the US. These questions include where your principal residence is, where your family lives, the jurisdiction from which your driver’s license is issued, and where your employment or business is located (if you are still working).
As always, if this is something you are considering, contact an accountant and/or lawyer that specializes in this area so that you do things correctly from the beginning. The United States can be a great place to spend your snowbirding months, so you want to do it right.