Thinking of becoming a snowbird?

What is a snowbird?

Canadian snowbirds are typically retirees who head south every year in search of sunnier skies and who live outside Canada for at least 30 days a year, but they could also be younger, early- to midcareer individuals taking advantage of remote work. Their lengths of stay vary, but Canadians can generally stay in the United States for up to six months without requiring a visa or changing their residency status.

Whether you plan to stay for a month or six, there’s a lot of planning to do. While you’re making a checklist, consider some three key financial implications of a lengthy stay in the United States.

1 You may have to pay U.S. income tax

If you have dual Canadian-U.S. citizenship, you’re likely already filing a U.S. tax return to report your worldwide income. But even if you’re not a U.S. citizen or resident, did you know you could still be considered a resident for tax purposes? Before you begin your snowbird adventure, it’s important to understand how U.S. tax rules may apply to you.

The substantial presence test

Under the Internal Revenue Service’s (IRS's) substantial presence test, you could be considered a U.S. resident for tax purposes if you spend 183 days or more in the country over a three-year period. This includes the number of days you stayed there in the current year (at least 31 days) and part of the time you spent in each of the two preceding years.

Let’s say you spent 120 days in the United States in each of the last three years, including the current one.

• Count the full number of days you stayed there this year: 120 days
• Add one-third of the days you spent the previous year: 40 days
• Add one-sixth of the days you spent the year before that: 20 days
• The total for the three-year period: 180 days

In this scenario, you would not be considered a resident under the substantial presence test.

What if you meet the substantial presence test?

Even if you spent 183 days or more in the United States under the substantial presence test, you may still seek an exemption from being considered a U.S. resident for tax purposes.

• You may be able to apply for the closer connection exemption if, during the current calendar year, you stayed there less than 183 days, haven’t applied for U.S. residency status, and can establish a closer connection to Canada than to the United States based on IRS criteria.
• Finally, you may still seek an exemption under the Canada-U.S. Tax Treaty by filing a nonresident return. This option would likely require consulting a U.S. tax specialist.

When will the Canadian Snowbird Visa Act be passed?

Some of these rules may change in the future if the proposed Canadian Snowbird Visa Act becomes a law. The proposed bill would establish a nonimmigrant visa for qualified Canadian citizens—mostly retirees—that would allow them to stay in the United States up to 240 days in a 365-day period. Until the bill becomes law, the current rules apply.

2 Covering your healthcare needs

Health insurance is an important consideration even for a short trip outside Canada, let alone a longer stay. Not having sufficient health insurance coverage can potentially be costly if any medical needs or emergencies arise. Your length of stay in the United States can also have other possible consequences. Here are three important things to think about when it comes to healthcare in the United States:

1. U.S. healthcare costs are higher than in Canada. While costs can vary by state, region, city, and institution, overall, the United States has the most expensive healthcare in the world.
2. Your provincial or territorial health plan provides very limited coverage of your medical expenses in the United States, which is why the Government of Canada recommends buying travel health insurance appropriate to your needs.
3. The length of your stay in the United States could potentially even affect your healthcare coverage at home, as each province or territory has minimum residency requirements for you to maintain your coverage. This, in turn, could affect your travel health insurance since most plans require you to have valid provincial or territorial insurance.

When it comes to your snowbirding healthcare needs, consider taking some time to research:

• The average healthcare costs at your U.S. destination, particularly for emergencies, but also for preexisting conditions, and any medications you may take
• What your provincial or territorial healthcare covers—and doesn't cover—abroad, how to get reimbursed, and the rules for maintaining your coverage
• Travel health insurance that’s appropriate to your age, general health, where you’ll be living in the United States, length of your stay, and the types of activities you’ll be engaging in

3 Accessing your money

As you plan your stay, think about how you want to set up your finances so that you’re able to manage your money, have ready access to cash, and be able to pay all your bills on both sides of the border—all without paying too much in fees and exchange rates.

There's a range of cross-border banking solutions available to snowbirds that you could consider, depending on your needs and how long you’re staying.

Many Canadian banks offer U.S. dollar credit cards or credit cards with no transaction fees on U.S. purchases; they may also offer U.S. dollar bank accounts that you can link to your Canadian account. This lets you move money between back and forth, pay your bills in both countries, get cash at ATMs, make debit payments, and write or deposit U.S. cheques—all while saving on foreign transaction, foreign exchange, wire transfer, and ATM fees.

Depending on how deeply you get invested in the snowbirding lifestyle, some packages can offer access to mortgages, loans, and wealth management services in both countries.

Taking the time to research the right cross-border package for your needs can help you save money and ensure you have access to your money when you need it.

Start early

The next snowbirding season will be here before you know it, and while there’ll be much more on your checklist, starting your planning with these considerations—and consulting a financial advisor to help you work through them—will have you well on your way to your new winter lifestyle.