A lot of people don’t want to stick around for a Canadian winter, and those who do manage to overwinter in a southern state need to be aware that it isn’t as simple as hop on a plane, sit in the sun, and come back to Canada when the tulips start poking their heads up.
There are income tax and accounting implications for extended living in a different country, and knowing what you need to take care of before you go will save you a lot of headaches.
Keep An Eye On Your Residency Status
Per snowbirdadviser.ca “Canadian snowbirds who spend extended periods of time in the U.S. risk being considered U.S. residents for tax purposes, which can trigger serious adverse consequences like U.S. tax filing requirements and paying tax in the U.S.”
Figuring out what rules the Internal Revenue Service (IRS) in the United States will use to determine your residency status is surprisingly complex, and it’s a good idea to sit down and figure it out before you start spending a significant amount of time there. Here’s a link to give you an idea.
And here’s a video that goes into more depth on the residency issue.
Real Estate Can Get Complicated
It can be tempting to buy some property in a lovely, warm place, but you need to know the tax implications before you buy. Your Canadian house that you live in for most of the year is the only place that can be sold without capital gains. If you have bought real estate in the USA and rent it out when you aren’t living in it, you may need to pay taxes to the USA. If you rent out your Canadian house while you’re in the USA, that will also have income tax implications.
Travel Medical Insurance Tax Credit
Going anywhere without travel insurance is a very, VERY bad idea; buying travel medical insurance before you go someplace is always recommended. The extra medical insurance can add up, so it would be a good idea to look at using those payments as tax credits.
Again, per snowbirdadvisor.ca “The cost of travel medical insurance can be quite significant, particularly for snowbirds who are older, have pre-existing medical conditions or are going to be travelling for extended periods of time.
"Fortunately, Canadians may be eligible for a tax credit that would allow you to recover a portion of the cost of your travel medical insurance.”
If you’re one of the people who manage to live the dream and spend winters someplace warm, drop by Shaw & Associates first to have a chat about tax and accounting implications of an extended stay in out of Canada.
Contact Shaw & Associates Chartered Accountants for accounting help you can count on. One complimentary meeting with us will put you and your business on a more profitable and positive path.