Just as our feathered friends are making their annual pilgrimage to sunnier skies, thousands of Canadian snowbirds will soon be heading to Florida, Arizona and other warmer places. Many of the clients we meet at our law office in Stittsville (Ottawa) head to the southern USA to get out of the cold and they are not alone. It has been estimated that over half a million Canadians spend their winters in Florida each year.
Canadian snowbirds need to be aware that changes may be coming that could have serious tax consequences for those wishing to escape our harsh winter.
Last year the US Senate passed the JOLT Act (Jobs Originated through Launching Travel) aimed at boosting travel to the US. It would have allowed certain Canadians who owned real estate in the US to stay in the USA for up to 8 months or 240 days per year without having to obtain a Visa. The proposed legislation didn’t make it through the House of Representatives.
On the face of it, the legislation may sound like a good thing. The problem, however, is that other applicable American and Canadian laws are not in alignment.
For example, if you actually spend that long in the US, you may become subject to both US income and estate taxes. Currently if you spend more than 182 out of 365 days in calendar year or more than 120 days per year on average over a 3-year period, you may be deemed to be a US resident. This means that you will be subject to US tax on your worldwide income. Your estate could also be subject to US estate tax on the value of your worldwide assets owned at death.
On the Canadian side of the border, there are departure taxes and health-care issues to think about. If you are considered as not being a resident of Canada, there will be a deemed disposition of all of your assets and you could owe capital gains taxes on those assets. If you are absent from Ontario for more than 212 days in a 12-month period, you may no longer be eligible for health-care coverage.
Some believe that the Act or something similar will eventually become law. We encourage our snowbird clients to become informed and stay tuned for any developments. If the proposed changes eventually become law, tax and estate planning with a team of professionals who understand the cross-border issues and the interplay among the various laws will be a must for every Canadian snowbird.
Reproduction of this blog is permitted if the author is credited. If you have questions or if you would like more information, please call us at 613 836-9915. This blog is not intended to be legal advice but contains general information. Please consult a lawyer or other professional to determine how the information in this blog might apply to you.
Blog posts pre-dated December 1, 2015 were originally published under Neff Law Office Professional Corporation.
