In this 50 Plus Forums dialogue, several issues were identified that are not well-known among Canadian snowbirds.
The IRS says the rule is: (current year stay in days) +
(previous year stay)/3 + (year before stay)/6 = 182
If you exceed this limit, then you have to file a US tax return. The main issue is that your Canadian RRSP/RRIF is not tax-exempt and so any income generated counts as current year income in your US IRS filing. There is an annual exemption granted if you file Form 8891 with your return. But there are other tax implications (e.g. estate taxes). If your worldwide assets are more than $2 million and your US assets are over $60k (all USD), then your estate can be liable for paying in tax 45% of all the US assets over $60K should you die while resident there as an alien. There is no spousal exemption. Now that condos are so expensive in Florida and elsewhere, this can become an issue. If you stay in the US for more than 30 days but less than 183 days, then you must file for an exemption using Form 8840. As it relates to the qualifications, here are a couple of zingers:
So in my prior post, I mentioned the $60K US assets rule. But any US stocks and bonds contribute to that total. So just renting your snowbird condo does not necessarily prevent their estate taxes from applying. Also worldwide assets include property, so your principal residence and any vacation properties would be included in the total ($2 Million US limit in 2008), and we all know what has happened to those values lately. To be safe, put a big non-recourse mortgage on your US property, and invest the proceeds in Canadian assets as recommended here. Other avoidance schemes include what the current "unified credit" is according to the Canada-US tax treaty. The unified credit is $780,800 in 2008 and $1,455,800 in 2009. But that treaty needs to be revised when the current estate exemptions expire in 2010. The safest approach is to put all your US assets into a Canadian corporation. If it is just a spousal transfer (i.e. no heirs), then a QDOT might suffice. The tax treaty can be found here, with special attention to Article XXIX B.
I noticed these paragraphs:
Now that it has been in The Toronto Star and this board,
you have been warned. In other words, ignorance is no excuse.
There has been an update from CIBC on some of these issues in March 2010. There seems to be no major changes. Source. And here is an article from BDO. There is a good publication which covers all this and more located here:
http://www.cra-arc.gc.ca/E/pub/tg/p151/p151-10e.pdf - Canadian Residents Going Down South
Copyright by Keith Cowan