Planning to spend the winter season in the US? Here’s what you need to know.
If you’re one of the thousands of Canadians “snowbirds” who head South of the border every cold winter, you should be aware of the potential tax liability you might take on based on your permanent residency. U.S. citizens along with green card holders pay taxes on their income regardless of the place of their residence.
While most snowbirds typically visit the U.S. only for winter months, there is a chance you wind up classified as a U.S. resident, which has a serious impact on your income tax. In some situations, you might even be required to pay taxes on their worldwide income.
Making Every Day Count
Even if you’re not a U.S. citizen or a green card holder, you might still be expected to pay taxes. A calculation table called Substantial Presence Test is a medium in computing your number of stay in the U.S., and the basis of the equivalent tax to pay. If your total calculation exceeds 182 days, you may be subject to income tax. To keep track of your days of stay, you must keep a written record to avoid issues.
On the other side, if you accumulated less than 183 days from the calculation, then you are subjected to Closer Connection Exception.
In this case, you are not considered as a U.S. resident. Several factors may help in determining a closer connection, these are:
- Permanent residence
- Family’s residence
- Location of personal resources
- Country of issuance of driver’s license
- Residence issued on documents
- Country where you obtain the majority of your income
These factors are also contained in the Canada-US Treaty. If you belong to this bracket, then you must be able to present papers and documents to receive its benefits.
It is true that requirements for tax filing and residency determination can be complicated, so it’s essential to consult with an expert cross-border professional advisor to get clear on the terms of all your tax obligations.