Cardinal Point’s Terry Ritchie looks at new measures to promote longer stays by Canadians in the U.S. The first proposal would let Canadians stay in the U.S. for up to 240 days per year, as long as they are 55 years or older, maintain a Canadian residence, and own/rent property in the U.S. Another provision would allow a Canadian to live in the U.S. for up to three years with a special Z Visa if he/she is over 55, purchases U.S. property for at least $500K (USD), has health insurance, and lives in the U. S. for more than six months. For both provisions, the Canadian could bring a spouse, but could not work in the U.S. For those already owning U.S. real estate, the Z Visa would not apply.
It’s also important to consider the income tax, estate tax, and health care implications of these measures. Consider the rules that relate to establishing U.S. tax residency, such as the Substantial Presence Test. Under this test, snowbirds who spend more than 183 days in the U.S. over a three-year-period are subject to U.S. income tax on their worldwide income. Those that meet this test can file IRS Form 8840 so they aren’t subject to U.S. tax, but U.S. tax residents must file IRS compliance forms when they own Canadian companies, bank accounts, investments, and retirement accounts or risk substantial penalties. The article also discusses rules for Canadian mutual funds, RRSPs, RRIFs, and new foreign asset reporting requirements.
What are the implications for U.S. estate taxes? Under the new rules, a Canadian could be subject to U.S. estate taxes on his worldwide estate, including all assets in Canada. The article provides a recent estate tax case to illustrate this. In terms of health care coverage, Canadians who are away from their province of residency for more than 182 days (some provinces vary) may lose coverage, and finding an alternative form may be challenging.
Read the full article here.
As always, we understand that U.S. Canadian Cross-Border issues can be be a challenge to understand, we are here to answer any cross-border wealth management questions you may have.