As the weather turns, many retired Canadians make like the birds and fly south for the winter. While the warmer climate and golf opportunities make this enticing, there are some things you need to know before you go. Below you’ll find some of the most critical advice for snowbirds.
Each Canadian province restricts how long you can be out of your home province before losing your government health insurance. If this happens, any medical expenses incurred upon your return would not be covered by your provincial health care. Additionally, most overseas medical insurance plans are only valid in conjunction with your provincial coverage — meaning you could pay for additional insurance and then have it declined. Check out this handy link for details on your home province’s travel restrictions.
Additionally, your taxes can be affected by extended stays outside Canada. If you own property in the U.S. or earn rental income on a Canadian property while you’re away, you may need to declare this to the Canadian Revenue Agency (CRA) or Internal Revenue Service (IRS) in the U.S. If you’re unsure how these rules apply to you, be sure to contact a lawyer or accountant for personalized advice. We can only offer travel tips for seniors – not legal advice.
If you spend a substantial amount of time in the U.S., you may also need to declare your time spent south of the border correctly with the IRS to avoid being considered a U.S. resident. Many snowbirds mistakenly assume that merely spending fewer than 183 days in the U.S. is sufficient to avoid this complication. This is not true. With the Canadian and American governments sharing more and more information, the chance of you slipping through the cracks like many in the past is becoming very small. Avoid these headaches by ensuring you don’t meet the IRS’s “Substantial Presence Test.” The IRS considers Canadians to be U.S. residents (for tax purposes) if they are physically present in the U.S. for:
- 31 days in a calendar year; AND
- 183 days in the three-year period covering the current year and two previous years, according to a weighted metric.
To calculate your total number of days for the second criterion, count the number of days you were (or will be) present in the U.S. during this year. Then add one-third of the days spent in the U.S. in the previous year. Now add one-sixth of the days spent in the U.S. in the year before that. This total must be less than 183 for you to prevent needing to file any paperwork with the IRS.
For example, let’s say you plan to spend December through March south of the border — that’s 121 days if it’s not a leap year. If you did this for each of the past two years as well, you would count one-third of the days from last year (40.33) and one-sixth of the days from the year before that (20.167). Therefore, your total number of days would be 181.5 days, and you’d be able to avoid any hassles with the IRS.
If you plan ahead and know the rules, you won’t end up with an expensive and complicated headache because of your winter travel in retirement. After all, the whole point of being a snowbird is to make your life more pleasant. Before you go, be sure to check out our travel tips for seniors to make flying a breeze.
What advice for snowbirds do you wish you’d known earlier? Share your best travel tips for seniors in the comments below.