Tax Insights: Count your US days ─ The snowbirds sing… and the IRS listens (2025 edition)

Issue 2025-46

In brief

For many Canadians, the opportunity to avoid a harsh winter by fleeing to the southern United States is irresistible. However, Canadians must consider the US income tax and immigration implications of an extended stay in the United States.

This Tax Insights outlines relevant US income tax and immigration rules. These rules apply to all Canadians. All dollar amounts are stated in US dollars, unless otherwise noted.

In detail

Snowbirds

Snowbirds – Canadians who spend a significant amount of time in the United States during the winter – may not realize that, simply by being present in the United States, they may have exposed themselves to the Internal Revenue Service (IRS), hungry for US income and estate tax.

The IRS considers foreigners who meet the US “substantial presence test,” along with US citizens and green card holders, to be residents and therefore potentially liable for US income tax.

A Canadian meets the substantial presence test if they spend:

• at least 31 days in the United States during the year, and
• 183 days or more in the United States under the following formula:
  Total days present in the United States in the current year
  + ⅓ of the days present in the United States in the year before
  + ⅙ of the days present in the United States in the year before that

It doesn't matter whether the purpose is business or otherwise. A day generally includes any part of a day spent in the United States, including arrival to and departure from, unless the individual is in transit through the United States.

Sample calculations are shown above for three possible combinations of days present in the United States in the last three years. Notably, 122 days’ presence (about four months) in each year produces a total of 183 days, constituting a substantial presence in the United States. In each example, one less day in any year would save the individual from meeting the US substantial presence test.

Two exceptions

Two important exceptions can save Canadians from being considered US residents and having to pay US tax.

The closer connection exception

A Canadian who meets the substantial presence test in a year may still be able to avoid being considered a US resident for tax purposes by successfully demonstrating:

• a “closer connection” to Canada, and
• that he or she was in the United States less than 183 days in the ‘current’ year

A closer connection generally exists if the Canadian is still considered a tax resident of Canada and their social and economic ties remain closer to Canada. The IRS looks at such things as:

• the location of a permanent home or homes, family connections, business and banking ties, and
• access to healthcare coverage, etc.

To claim the closer connection, the individual must file US Form 8840 for each year in which the substantial presence test is met and the closer connection exception is claimed. This form does not have a filing extension option and is ineligible for late filing. The deadline for filing Form 8840 is June 15^th of the following year.

The treaty exception

Canadians who spend 183 days or more in the United States during the year can still avoid being considered US residents for tax purposes if the “tie-breaker” rules in the Canada-US tax treaty (the treaty) work in their favour. This is a far more detailed deliberation and requires much more disclosure than the closer connection exception.

To claim the treaty exception, a US non-resident income tax return (Form 1040NR) must be filed, including a disclosure (Form 8833) explaining why the individual should be considered a resident of Canada. The deadline for filing both forms is June 15^th of the following year (they must be filed for each relevant year), and both forms are eligible for a 6-month filing extension.

Even if the treaty exception results in Canadian residency for tax purposes, the individual may still have other IRS disclosure requirements, including those that apply to Canadian bank accounts (Form FinCEN 114) and to specified foreign financial assets (Form 8938), interests in Canadian corporations (Form 5471) and Canadian trusts of which the individual is a beneficiary or trustee (Form 3520-A and Form 3520). Severe penalties can be imposed for non-compliance. For these reasons, in spite of the treaty, Canadians generally should limit their presence in the United States to 182 days in any calendar year.

Owning a US vacation property

Canadians who personally own their US vacation properties face additional tax considerations. If they rent out their properties for any part of the year, federal and potentially state income tax returns must be filed each year to preserve deductions that can be claimed on the eventual sale of the home. Generally, rental income from US real property received by a non-resident alien is subject to a flat 30% tax rate if it is not considered “effectively connected income” (ECI) with a US trade or business. However, an election can be made to treat all income from US real property as ECI, allowing it to be taxed at graduated rates based on net income. Once the election is made, it will remain in effect until revoked. Net rental income or loss must be reported on US Form 1040NR, which must be filed by June 15^th of the following year, with an option to extend for 6 more months.

The sale of a vacation home must be reported on the US federal return, Form 1040NR. A state income tax return may also be required, depending on the location—but no return is required in Florida, Texas and a few other states. Under the US Foreign Investment in Real Property (FIRPTA) rules, a 15% withholding tax on the gross proceeds from sale may apply at the time of the sale. There are a few exceptions available in reducing or eliminating FIRPTA tax withholdings. Taxes withheld can be claimed as a payment against the final US tax liability.

While the individual owner will be required to report the sale on a Canadian tax return, the final Canadian tax will be reduced by the amount of any US federal and state taxes paid on the sale, preventing double taxation.

Canadians may be required to file a closer connection exception form (Form 8840), a US non-resident income tax return (Form 1040NR) or tax withholding forms under the FIRPTA rules. To do this, they must have a valid US tax identification number (ITIN). There are several ways to apply for an ITIN – by mail with original documents, in person at the designated IRS Taxpayer Assistance Center or through an IRS-approved Certifying Acceptance Agent.

For more information on ownership of a US vacation home, see our Tax Insights “2025 Estate tax update: Canadians owning a US vacation home.” 

US estate tax

In addition to income tax, the ownership of US real estate can expose Canadians to US estate tax, regardless of the amount of time spent in the United States. The US estate tax applies to a Canadian individual holding US-situs assets at the time of their death. US-situs assets include such items as stocks of US companies, US pension plans (including IRA’s and 401(K) plans) and US real estate. Additionally, it is important to note that US stocks held in Canadian non-registered accounts, as well as registered accounts, such as Registered Retirement Savings Plans (RRSPs), Registered Retirement Income Funds (RRIFs) and Tax-Free Savings Accounts (TFSAs), are considered US-situs assets for US estate tax purposes.

Estate tax is calculated at graduated rates based on the fair market value of the individual’s assets net of liabilities at the time of death. Current rates range from 18% to 40%, depending on the size of a person’s taxable estate. However, Canadians are entitled to additional credits under the treaty to reduce or eliminate their US estate tax liability. Canadians can claim the unified credit, which is equal to the greater of:

• $13,000, and
• a 2025 exemption of $5,541,800¹ prorated based on the value of US-situs assets over the value of the worldwide estate

In addition, if assets are bequeathed to a surviving US citizen spouse, an unlimited marital deduction may be claimed. However, if the US-situs assets are left to a non-US citizen spouse, a marital credit equal to the lesser of the pro‑rated unified credit and the amount of US estate tax owing may be available instead.

It is important to note that if the value of the US-situs assets at the time of death are greater than $60,000, the US Estate Tax Return Form 706-NA (Estate of Non-resident Not a Citizen of the US) must be filed. The deadline for filing the estate tax return is 9 months after the date of death, with an option to request a filing extension for an additional 6 months.

Due to credits allowed under the treaty, US estate tax liability is generally eliminated for Canadians; however, in certain cases, Canadian residents may still be subject to US estate tax. In such instances, the US estate tax paid may potentially be claimed as a foreign tax credit on the Canadian terminal personal income tax return. Nevertheless, careful tax planning is essential to mitigate the risk of double taxation exposure.

For more information on US estate tax, see our Tax Insights “2025 Estate tax update: US estate tax exposure for US Citizens living in Canada.”

US gift tax

Under US transfer tax rules, Canadian citizens and non-residents of the US are subject to US gift tax when they transfer certain US‑situs property. For example, gifting an interest in US real property is subject to gift tax. In contrast, gifts of intangible property, such as shares of a US corporation, are generally not subject to US gift tax. US gift tax may also apply in situations where funds are transferred to a child living in the US, and the child subsequently uses those funds to purchase US real property. It is important to note that US gift tax applies to the donor, not the donee. Additionally, careful gift tax planning is recommended, as differences in tax treatment between Canada and the US may result in double taxation.

In addition to the donor’s potential gift tax liability, if the child is a US tax resident and receives gifts exceeding $100,000 from related foreign persons, the child is required to report these gifts on IRS Form 3520. The $100,000 threshold applies to the aggregate amount of gifts received from related foreign persons. Failure to timely file Form 3520 (by April 15^th of the following year; a 6‑month filing extension is available upon request) can result in significant penalties.

US immigration

Canadian nationals regularly travel to the United States without regard to the complex immigration rules that are at play in the background. While Canadians generally enjoy seamless, frequent travel between the United States and Canada due to the shared border, there are important considerations that Canadian snowbirds must consider if they wish to spend a significant amount of time in the United States.

New US registration requirement

In early 2025, US President Trump issued an executive order which mandates all visitors to the United States, who are 14 years of age and older and planning to stay in the US for 30 days or longer in a single visit, to register with the Department of Homeland Security (DHS). Generally, Canadians would be exempt from this registration requirement, as long as their electronic Form I-94 admission record (see below) was issued upon their entry to the United States. However, in some cases an I-94 may not be generated at the time of entry and, as a result, would subject Canadians to the new registration requirement. Failure to comply with the new registration requirement may result in fines and potential imprisonment in the US. Canadian snowbirds should check if their I-94 admission record was issued upon their entry to the United States by visiting https://i94.cbp.dhs.gov/.

I-94 admission record

Whenever a foreign national enters the United States, an I-94 admission record should automatically be generated as evidence of their legal admission. This document contains an expiry date that mandates when the individual must depart the United States.

The permitted admission period noted on the I-94 record is determined at the discretion of the DHS and US Customs and Border Protection (CBP) officials at the port-of-entry. While six months is the common admission period for Canadian snowbirds, the CBP official has the authority to limit the duration or even deny entry. Thus, it is important that snowbirds recognize that admission into the United States for six months is always discretionary and never guaranteed.

In addition, the six-month admission period may be limited to reflect days spent in the United States within the previous 12 months. While an individual may receive a fresh 180-day period upon a subsequent re-entry, this is not guaranteed.

Canadian nationals may not realize that they have an I-94 record, but it should be reviewed to take note of the granted admission period. Remaining in the United States beyond the expiry date can have serious repercussions. The record is available online at https://i94.cbp.dhs.gov/.

The takeaway

Canadians travelling to the United States for extended periods should keep track of the number of days they are spending in that country from year to year, to manage their potential US tax exposure. Ownership of US-situs assets can further complicate a traveller’s US tax situation. Snowbirds should be aware of applicable US tax filing and immigration registration requirements, to avoid incurring financial penalties and experiencing possible border delays and detention.