My question is: Applicable to both US and Canada
QUESTION: My husband and myself are recently retired Canadians
who have purchased a Florida home.
We plan to remain residents of Canada; we also plan to spend
about 6 months per year in the US. It seems that we may be able
to acquire Florida residency, as well as our Canadian residency
status.
Would Florida residency allow us to bypass capital gains exposure
in the US, when we eventually sell our home there??
What possible pitfalls might there be in this?
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david ingram replies:
Unless you have some sort of visa giving you a working status or
a resident alien status, you can not become legal "LIVING"
RESIDENTS OF THE USA. You can, by accident, become TAXABLE
residents of the USA. This can happen when you are in the USA
for more than 123 days 3 years in a row.
For Example,
The US will take the number of days you are there in 2004
123
Add 1/3 of the 123 days you were the year before (2003)
41
and add 1/6 of the 123 days you were there 2 years ago (2002)
20
184
If that adds up to more than 183, you are taxable on your world
income in the USA and must file a 1040 or 1040NR
If you can prove a closer connection to Canada by filing form
8840, you can escape US tax on the Canadian Income but still have
to file the forms once you have exceeded 123 days three years in
a row.
Obviously, if you are there for more than 183 days in one year,
you have to report your world income to the USA and if you are
there for 180 days this year and were there for 30 days last
year, the 180 plus (1/3 of 30) 10 equals 190 and you have to file
the 1040NR and the 8840.
You also have to be wary of spending more than 183 days in the
USA for another reason. It is tempting to be there for your
almost 180 days over the winter at one time and then spend
another month travelling in the US in the summer making your time
210 days in the USA for the calendar year, everything fully
taxable in the USA and disqualifying yourself for your Canadian
medical "because"
The other thing that rears its ugly head is that if your
provincial medical plan discovers you are out of the country more
than 183 days a year they will cancel your provincial medical
coverage. I have dozens of cases where BC medical cancelled
people's medical plans retroactively and sent them bills for up
to $100,000.
My favourite one (as an example) involved a fellow who gold mined
in the Yukon for four months of the year from about May 15th to
Sept 15th and spent Oct 15 to March 15th in Mexico, He and his
wife were only in BC about 3 months of the year and B C medical
cancelled the insurance retroactively for 10 years. In another
case, the husband and wife were both Vancouver city employees who
commuted to work in Vancouver from Washington State. BC Medical
cancelled their medical retroactively and made them pay every
bill that was paid for them for the past six years. To give them
credit, BC medical also refunded them their medical premiums.
But the official rule is that to qualify for a provincial medical
plan you must both make your home in the province and SLEEP IN
THAT PROVINCE MORE THAN 183 NIGHTS A YEAR.
SPENDING FOUR MONTHS IN BC, FOUR MONTHS IN ALBERTA AND FOUR
MONTHS IN NOVA SCOTIA ON A REGULAR BASIS WOULD DISQUALIFY YOU
FROM BELONGING TO ANY PROVINCIAL MEDICAL PLAN.
At any rate, you do NOT want to become a resident of Florida
although Florida will want you to have a driver's licence if you
are there for that long a year. You should be able to get a
Florida snowbird driver's licence. Every state is different,
California is happy to let you drive on your Canadian licence as
long as you have a full home able to you in Canada.
--------------------
Answers to this and other similar questions can be obtained free
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