Canadian snowbirds who escape the winter chill by moving down south to their second homes in warmer US climes need to be sure not to outstay their welcome.
If you spend more than the permitted 182 days in your southern residence you could become liable for US taxes, be barred from re-entering Canada for five years, and lose your rights to free Canadian healthcare.
It all stems from an agreement last year between the US and Canadian border authorities to scan passports and share immigration information, which means that the powers that be in both countries are now well aware of the amount of time you spend outside Canada.
In fact, even 182 days (one day short of six months) could now be too long. The US Internal Revenue Authority (IRA) is becoming ever more interested in Canadians who like to winter overseas and if you have shown “substantial presence” in the US for a number of years it is possible that you too will soon be under investigation.
“Substantial presence” is calculated by a complex formula but basically means that you have resided in the US for more than 120 days per year for three years or more.
This includes many Canadian snowbirds who in the past have tended to escape the onset of winter by leaving in October and returning with spring at the beginning of April.
Now, in order to comply with the rules, many people are counting days and re-scheduling their return a month or so early or are planning to spend a little more time in Canada at the onset of this year’s cold season.
Others are adding on a cruise at the beginning or end of winter to prolong their time out of the snow.
And others are making a point of filling out IRS Form 8840 which enables you to document your close connections with Canada and at the same time stay beyond the 120 days that establish your ‘substantial presence’ in the US – which should help to keep the tax authorities at bay.
In addition, everyone is making sure to travel with plenty of documents that establish Canadian residency – such as property tax statements, utility bills and any other information that shows that your ‘real’ home is actually further north!
However, despite the increased interest in their movements from the IRA, Canadians continue to winter down south in ever increasing number. Canadian snowbirds spent almost $14 billion between March 2013-March 2014 buying property in the US – an astonishing 15% of international real estate sales. Three quarters of those properties are located (who would have guessed?) in the warm sunny towns and cities of Florida, California and Arizona, with more than half a million in Florida alone.
Given the recent dip in the value of the Canadian dollar and the rising real estate prices in the US, these residences overseas may turn out to have been a very wise investment. According to some sources, those Canadians who invested in 2013 may already have made 20% based on the recent rise in value of the US dollar. On top of this, property prices in many areas of the US rose in double digits – adding still further to the return for snowbird investors.
In fact, for those who still have money to invest, compared with the cost of properties in prime Canadian locations such as Vancouver and Toronto, the US sun-belt is still reasonably priced and well worth investigating.
If you are interested in investing in property in the US or elsewhere overseas and are considering taking out a mortgage, please feel free to consult our expert brokers at Best Mortgage Montreal.
We offer realistic and practical advice on all types of mortgages and offer some of the lowest interest rates in Montreal.
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Best Mortgage Montreal – offering expert advice to Canadian Snowbirds looking to finance a second home overseas.