BVA Blog

U.S. Tax Issues for Both Canadian and U.S. Citizens - Part 2

Monday, August 22, 2016

Canadian Residents or “Snowbirds”:
The term “snowbirds” is used to describe Canadians who spend a fair amount of time in the U.S. usually to vacation and escape our winters. The number of days you spend in the U.S. will have an impact on the determination of your residency for tax purposes.

The U.S. Internal Revenue Service (IRS) applies a test known as the “substantial presence test” to determine whether or not an individual will be considered a U.S. resident for income tax purposes. This test uses the number of days spent in the U.S. and looks at a weighted average of total number of days in the U.S. over the past 3 years. When you reach 183 days/year, you are also a U.S. resident for tax purposes.

If you travel or vacation substantially in the U.S., but are still there less than 183 days/year, there still may be some filing that should be done to help solidify your case of U.S. non-residency. We would like to sit down with you to determine the options available if you are in this situation or plan to be in the future.

Ownership of U.S. Rental Property:
Regardless of days spent in the U.S., if you own a rental property in the U.S. you will most likely have U.S. tax filing requirements as well. There are many options for reporting your income on rental properties to the IRS.

The default option on foreign rent is for your property manager to withhold 30% of the gross rents received and remit that to the IRS. Another option, which is often more beneficial, is to file a U.S. tax return for the net rental income.

The process to get to that point involves many steps. We could meet with you to discuss your situation and provide advice on the appropriate steps and filing obligations that are required for your property.

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