I’ve been a (working) snowbird in Florida for 5 years and I love it. My husband and I feel very fortunate. But, like everything else, there’s a learning curve. Aside from learning how to live in 2 countries, there are tax and real estate considerations. This is especially true since the Jobs Originated through Launching Travel (JOLT) Act was proposed in the spring. Among other things, the act would extend the time Canadians buying homes for $500,000 or more can be in the U.S. without a visa from the current 182 days to 240.
The JOLT Act didn’t make it through Congress this fall, but it’s likely to pass on reintroduction if pressure to reduce the real estate benchmark and make tax changes is successful.
It will be great to have the flexibility. However, it could mean that more snowbirds are subject to U.S. income and estate tax because they will be deemed U.S. residents.
The formula for determining U.S. residency is a bit complex but essentially amounts to an average of 120 days annually over 3 years. That means some snowbirds are already considered U.S. residents but don’t know it.
The whole point of JOLT is to benefit the $130 billion U.S. travel industry. I suspect that tax changes will be included when the act is eventually passed, otherwise Canadian snowbirds will steer clear of Uncle Sam by keeping their winter sojourns shorter.
In the meantime, anyone who spends an extended period of time in the U.S. and is not working or studying should file Form 8840, Closer Connection Exception Statement for Aliens. Essentially, it’s a declaration of Canadian residency.
Snowbirds should also maintain a log of when they cross the border and keep copies of credit card statements, income tax assessments and property taxes, just in case there is a question about location of permanent residency.
Don’t try to cheat! Next summer a new system will track not only when you enter the U.S., but also your departure.
The other issue for snowbirds owning a U.S. home is that if the Canadian owner or a joint owner dies, the U.S. property may be subject to estate tax. Most Canadian snowbirds won’t have a problem unless they have worldwide assets of more than $10.68 million for a couple or $5.34 million individually.
Nonetheless, there may be Canadian tax on capital gains to be paid for a second home in the U.S. or tax on rental income. Canadians who bought property at bargain prices between 2008 and 2012 could make substantial gains if the market eventually moves back to more normal levels and if the loonie continues to slide.
Another important issue for snowbirds is health care. Provincial health plans don’t cover you if you’re out of the country more than 6 months and you may have to re-establish residency in order to qualify again.
As if all of this weren’t enough to give snowbirds pause, in Florida there are significant recent changes in insurance for homes or condo developments in areas deemed flood zones. Before you buy, check into what a new insurance policy will cost and get the quote in writing.
Enjoying the snowbird lifestyle isn’t as simple as it was years ago. But if you take your time, follow all regulations to the letter, use a U.S.-based lawyer for real estate transactions and keep on top of developments through organizations such as the Canadian Snowbird Association, you’ll find, as I do, that the winter-less life is really quite fine.