14 Jan 2014

Spread your tiny wings and fly away!

Oh snowbirds … so many of us are a little jealous of your intrepid ways, heading south of the frozen tundra for months at a time.

Are you spending your retirement days golfing in Phoenix or sitting in the Florida sun?

snowbird tax rules

Darn you. It’s been cold here, darn cold. But, hey, we get to live in Calgary, one of the best cities in the world, so we still have that.

If you’re a seasoned snowbird, you know you’re familiar with the six-month limit on your stay in the United States.

But do you know about the tax laws the Canada Revenue Agency enforces on you?

Tax laws for snowbirds

The federal government considers you a “factual resident of Canada” if you spend part of the year in the U.S and you maintain residential ties in Canada.

You could be there for health reasons or on vacation. But, as long as you own a home or property, you are still a Canadian resident.

Thus, the CRA taxes your income as if you never left Canada.

You must:

  • Report all income you receive from sources inside and outside Canada for the year, and claim all deductions that apply to you
  • Claim the federal and provincial or territorial non-refundable and refundable tax credits that apply to you
  • Pay federal tax and provincial or territorial tax where you keep your residential ties in Canada

You are eligible to apply for the goods and services tax/harmonized sales tax (GST/HST) credit and any related provincial credits.

However, if you have applied for and been granted U.S. citizenship, you now must file your taxes with the Internal Revenue Service.

Filing your tax return

If you are a factual resident of Canada and spend much of your time in the U.S., you accompany your T-1 tax return with Form T-1248 to provide information about your residency status.

It isn’t quite that uncomplicated. You may face additional rules if, for example, you:

  • Own foreign property
  • Have U.S. gambling or lottery winnings to report
  • Have rental income from property in the U.S.
  • Paid medical expenses in the U.S.
  • Donated to U.S. charities

For more information on how to handle these and other snowbird issues, check the CRA web page dedicated to “Canadians going down south.”

Here to help

A1 Accounting, a Calgary accounting and bookkeeping firm, is here to assist you with your taxes and planning. We specialize in personal taxes and small-business accounting and financial services. Contact one of our tax specialists and we can help you optimize the tax benefits and credits available to self-employed individuals and small businesses.

Fill out our contact form or give us a call at 403-226-8297.