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The days add up faster than people expect.
Wintering south or keeping a place across the border rarely feels like a tax event. The day count formula, the withholding rules on rent and the process for selling as a non resident all say otherwise.
What this means in practice
Three rules catch out people who consider themselves visitors rather than taxpayers.
The count is not what you think
The US substantial presence test uses the current calendar year and the two preceding calendar years, weighting the current year fully, the year before at a third and the year before that at a sixth. It generally needs at least 31 current year days and 183 weighted days. Whether four winter months crosses the line depends on the actual day count: 120 countable days a year gives 180 weighted days and stays under, while 125 a year goes over. Certain days are excluded.
Withholding applies on the gross
Rental income from a property across the border is generally subject to withholding on the gross rent rather than the profit. The two countries handle this differently. For US property, the section 871(d) net income election is made with a return statement, and W-8ECI addresses payer withholding where applicable. For Canadian property, Form NR6 is submitted in advance for approval to reduce withholding, and the section 216 election is made through the return. Gross withholding continues until CRA approves NR6. Net income treatment can reduce tax, but does not guarantee a refund.
Clearance comes before closing
Disposing of property as a non resident triggers a withholding and clearance process on either side of the border. Starting early may reduce the cash tied up in withholding, and excess amounts can generally still be recovered through the applicable return or refund process afterwards. Withholding is a credit toward the tax, not a guaranteed full refund.
How the day count actually works
A worked example. Four winter months a year looks modest until the three year formula is applied to it.
The formula
120 days each winter
Before you head south
A short list that prevents most of the problems we are called about in March.
- Keep a day log. Entry and exit dates for three years, not just this one.
- Check the closer connection deadline. The statement protects you only if it is filed on time.
- File the net rental election before the first rent is collected, not after.
- Get a taxpayer number in advance. Applying under time pressure during a sale is the hard way.
- Confirm provincial health coverage limits against your actual travel pattern.
- Start the clearance process early if a sale is anywhere on the horizon.
- Keep receipts for improvements. They reduce the gain on eventual disposal.
- Tell your insurer and your bank where you are resident, so their reporting matches yours.
The forms that usually apply
Which apply depends on where the property sits and where you are resident.
Days and residency
- 8840 closer connection exception statement
- 1040NR where a US filing is required
- 8833 treaty tie breaker positions
- Careful day records for three years
- Provincial health coverage day limits
- Travel history reconciliation
US property
- 1040NR reporting rental income
- W-7 individual taxpayer number application
- 1042-S withholding statements
- Net election on rental income
- 8288 and 8288-A on sale
- State level filing where applicable
Canadian property
- Section 216 non resident rental return
- NR6 undertaking to file
- NR4 withholding slips
- Section 116 certificate of compliance
- T2062 on disposition
- Principal residence analysis
Where it usually goes wrong
Three assumptions that cost snowbirds and owners real money.
The 183 day myth
People believe they are safe under 183 days in the current year. The weighted count uses the current and two preceding calendar years, so a steady annual pattern can put you over without any one winter being unusual. The closer connection exception is a separate test with its own conditions, including fewer than 183 actual US days in the year, a foreign tax home throughout the year and stronger foreign connections. It has a filing deadline.
Renting without the election
Left alone, withholding applies to the gross rent. Filing the election to be taxed on net rental income after expenses usually reduces the liability substantially and often produces a refund of what was withheld.
Selling without a certificate
Both systems hold back a slice of the sale proceeds until compliance is confirmed. That is normal and recoverable, but only if the process is started well before closing rather than discovered at it.
Questions snowbirds and owners ask
This is general guidance rather than advice on your situation.
How many days can I actually spend across the border?
There is no single number, because the US test weights three years together and Canada looks at ties rather than days alone. As a rough guide, a consistent pattern of four winter months will usually engage the formula, at which point a closer connection statement or a treaty position becomes relevant.
I have never filed anything and I have been going south for years.
That is a very common position and it is usually resolvable. The statements that protect you have deadlines, so the first step is establishing which years are open and what the exposure actually is before deciding how to bring things current.
Do I need a US taxpayer number to own property there?
For most filings and for the withholding process on a sale, yes. Applying for one takes time and is far less stressful arranged in advance than requested urgently while a sale is pending.
What about provincial health coverage?
Provinces set their own limits on how long you can be away before coverage is affected, and those limits are separate from anything tax related. It is worth checking them against your travel pattern at the same time.
Other situations we handle
Owning across the border often overlaps with these.
Count the days before someone else does.
Twenty minutes, no charge, and a written fixed quote afterwards. Evening slots on both time zones.
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