With the Canadian and U.S. governments intensifying their cross-border data collection systems, it is more important than ever for Canadians who spend substantial leisure time in the U.S. to know the rules about how long they can stay, how they can avoid paying taxes to America’s IRS, and how they can hold on to their domestic health insurance coverage.
Let’s review them.
Residents of Canada are allowed to stay in the U.S. for up to six months in any consecutive 12-month period on their virtual B2 visa.
Explanation: The B2 visa is the immigration category covering leisure visits, tourism, and non-business travel. It is not a specific piece of paper. Because the limitation was devised over time by various differing pieces of legislation and is applied for different purposes, there is no exact definition of “six months.” Some border agents consider it to mean 182 days, others 180 days, still others actual six months (e.g., January 15 to July 15). To stay on the safe side, I recommend you go by the 180-day marker. Also, that six-month allotment can be in one continuous stay or an accumulation of several shorter stays within the previous 12 months. These totals are not calculated in a calendar year basis, but rather on a rolling 12-month period.
What constitutes a day?
Any part of a day during which you are on U.S. soil counts as one day. Example: You cross over to Buffalo for dinner with friends on Friday evening and return after midnight (Saturday), you will have used up two days.
When does the IRS consider you taxable?
On this subject, there is considerable confusion because the rules for Aliens for Tax Purposes are different from the B2 visa rules. So keep them separate. Some snowbirds are under the impression that if they pay taxes to Uncle Sam they can stay longer than six months. But that is false. Unless you have a specific visa (student, investor, green card, etc.), you are not allowed to stay in the U.S. longer than six months out of 12, even if you’re willing to pay U.S. taxes
The IRS rule for considering you taxable is based on the so-called Substantial Presence Test and is calculated according to an averaging formula over three calendar years. I emphasize calendar years—not rolling 12-month periods as defined for the B2 visa.
The IRS publishes a specific formula for what constitutes Substantial Presence, and it generally boils down to an average of 120 days per year over the previous three years. The formula goes like this:
To meet this test, you must be physically present in the United States (U.S.) on at least:
- 31 days during the current year, and
- 183 days during the 3-year period that includes the current year and the 2 years immediately before that, counting:
- All the days you were present in the current year, and
- 1/3 of the days you were present inthe first year before the current year, and
- 1/6 of the days you were present in the second year before the current year.
After you calculate all that, you can take relief in knowing that you can still avoid those taxes by simply submitting a Closer Connection exemption statement (Form 8840), which establishes that you have a closer connection to Canada than to the U.S. each year. That exempts you from filing anything further with the IRS. There is an exception if you have actually earned money via investments or work done in the U.S., but for most snowbirds, it’s a get-out-jail-free card.
What about your provincial health care benefits?
Provincial health insurance benefits are premised on your being a true resident of your province, which means you must be physically present in your province for a specific number of days to qualify. That number used to be a minimum of 183 days (six months plus a day). However, over the past 20 years that requirement has been whittled down to allow residents to enjoy the southern sun a while longer. And now, with the exception of Prince Edward Island and Quebec (183 days), residents of all other provinces are required to be physically present at least 152 days a year (five months). Newfoundland and Labrador is even more generous, requiring only four months of physical residence.
Some provinces calculate that on a calendar year basis, others on a rolling 12-months basis). In upcoming issues, we’ll go into more detail on individual provincial rules.
Many snowbirds make the mistake of assuming that because they are allowed to stay out-of-province for seven months, they can spend that time in the U.S. That’s wrong. These are two different sets of rules.
The U.S. allows you six months (depending on the judgment of the U.S. border control agent), under the B2 visa rule. Your health care allowance is irrelevant to U.S. border control agents. But you can use the additional month to travel elsewhere—to other provinces, Europe, Asia, or wherever else you feel compelled to go.
So go ahead, enjoy. But keep your rules straight.
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