Snowbirds who flout the six-month residency rule in the U.S. could face huge tax consequences as the authorities prepare to clamp down on short-term residents.
The changes are part of the Entry-Exit Initiative and the Perimeter Security and Competitiveness Action Plan, a larger cooperative effort between the U.S. and Canada that was announced in 2011.
From June 30, the authorities will share the information of travellers when they both enter and depart each country. Prior to this, Canadians had to self-report their time out of the country and residence status.
With less purchasing power thanks to the falling Loonie and some U.S. markets rebounding fully, many critics believe snowbirds and investors may postpone their American investment dream this year.
However, Ryan Kohl from Express Capital Mortgage in Arizona tells CREW that Canadian demand is still as strong.
“Our volume increased last year and we financed over 450 properties for Canadian investors just in Arizona alone before branching out in other states. Already this year as of March 1, we have facilitated the financing for 125 properties and currently have another 475 properties in process due to close in the next two months.”
Snowbirds that reside in the U.S. for longer than 180 days in a rolling 12-month period could be deemed a resident and subject to tax on worldwide income, while their property could also be liable for estate tax.
The residential rules could also impact Canadians who are away from their primary residence for long periods of time. For example, Ontario residents lose their status if they are away for more than seven months in a year.
Those who overstay could also fall within the “unlawful presence” rules while offenders could be banned from entering the U.S. for a minimum of three years and a maximum of 10 years.
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