Snowbird Planning: The Financial and Tax Implications of Wintering in the U.S.
What Ontario retirees need to know before spending extended time in the United States
For many Ontario retirees, escaping winter in the southern United States — Florida, Arizona, or the Carolinas — is one of the great pleasures of retirement. The sun, the warmth, the golf. But spending significant time in the U.S. also brings a complex set of financial and tax considerations that many Canadian snowbirds are unaware of — until they receive an unexpected bill.
This article covers the most important financial and tax issues that Ontario residents should understand before committing to an extended stay in the United States.
1. The 183-Day Rule and U.S. Tax Residency
The most significant risk for Canadian snowbirds is inadvertently triggering U.S. tax residency under the IRS's Substantial Presence Test. Under this test, you are considered a U.S. resident for tax purposes if you spend 183 or more 'equivalent days' in the U.S. over a three-year period, calculated using a weighted formula:
All days in the current year count at full value
Days in the first prior year count at 1/3
Days in the second prior year count at 1/6
This means spending 120+ days per year in the U.S. can potentially trigger Substantial Presence — even if you never exceed 182 days in a single year.
If you trigger the Substantial Presence Test, you may be required to file a U.S. tax return as a resident, potentially exposing your worldwide income to U.S. taxation. The Canada-U.S. Tax Treaty provides some protection through the 'Closer Connection Exception' — but claiming it requires filing Form 8840 with the IRS before the June 15th deadline each year.
Annual Action Item
Every Canadian snowbird spending more than approximately 120 days per year in the U.S. should file IRS Form 8840 (Closer Connection Exception Statement) annually. This declares that your primary ties are to Canada, not the United States, and protects you from U.S. tax residency. Missing this filing is a common and costly mistake.
2. Ontario Health Insurance (OHIP) and Out-of-Province Coverage
OHIP requires that Ontario residents spend at least 153 days per year in Ontario to maintain eligibility. You are allowed to be out of the province for up to 212 days (approximately 7 months) without losing coverage. But there are specific rules and the calculation can be complex.
Even more important: OHIP provides very limited coverage for healthcare costs outside Canada. If you require medical treatment while in the United States, even something as routine as an emergency room visit, the costs can be catastrophic without supplemental travel health insurance. A single U.S. hospital stay can easily cost $50,000–$500,000 USD.
Travel health insurance for extended U.S. stays is essential for all snowbirds. Key considerations:
Purchase a policy that covers your full travel period, including pre-existing conditions if applicable
Disclose all pre-existing conditions accurately. Failure to disclose can void coverage when you need it most
Compare policies annually. Premiums for older travellers or those with pre-existing conditions can vary significantly by insurer
3. U.S. Estate Tax: A Risk Many Canadians Don't Know About
Canada has no estate tax. The United States does — and it can apply to Canadian residents who own U.S. property at death. Under U.S. estate tax rules, non-resident aliens (including Canadians) are subject to U.S. estate tax on U.S.-situs assets, which include:
U.S. real estate (a Florida condo or Arizona vacation home)
U.S. stocks held directly (not through a Canadian fund or ETF)
U.S. tangible personal property located in the U.S.
The U.S. federal estate tax rate on amounts above the exemption can reach 40%. The exemption available to non-resident aliens is only $60,000 USD. Far lower than the multi-million-dollar exemption available to U.S. citizens. The Canada-U.S. Tax Treaty provides relief, but the interaction is complex and the risk is real for Canadians who own U.S. property.
Strategies to manage U.S. estate tax exposure include holding U.S. real estate through a Canadian corporation or trust rather than personally, or using life insurance to fund the estimated estate tax liability. These structures require careful legal and tax advice in both jurisdictions.
4. Buying U.S. Real Estate as a Snowbird
Many snowbirds eventually move from renting to purchasing a U.S. property. Beyond the estate tax issue above, there are other important financial considerations:
Foreign currency risk: the USD/CAD exchange rate can significantly affect the Canadian-dollar cost of U.S. property, both in purchase and carrying costs
U.S. mortgage availability: Canadian residents may face limitations in accessing U.S. mortgages; financing often requires a larger down payment or must be sourced through Canadian lenders
Rental income reporting: if you rent out your U.S. property while not using it, the rental income is subject to U.S. tax and must also be reported in Canada (with foreign tax credits available to avoid double taxation)
FIRPTA withholding: when selling a U.S. property, 15% of the gross sale price is typically withheld by the buyer and remitted to the IRS as a withholding tax — which may be refundable depending on your actual U.S. tax liability
5. Banking and Financial Accounts While in the U.S.
Maintaining a U.S. bank account can simplify day-to-day spending while in the U.S. — but it comes with reporting obligations in Canada. Canadian residents with foreign financial accounts exceeding CAD $100,000 at any point in the year are required to report them on the Foreign Income Verification form (T1135). Failure to file can result in significant penalties.
Additionally, holding U.S. dollar investments in Canadian accounts (rather than opening a U.S. brokerage account) generally keeps your investment reporting simpler and in a single tax jurisdiction.
Planning to Spend Your Winters in the Sun?
Snowbird financial and tax planning spans two jurisdictions and touches on healthcare, immigration, tax, real estate, and estate law. We help Ontario retirees plan for extended U.S. stays in a way that protects their health coverage, minimizes tax exposure, and avoids costly compliance mistakes.
Contact us today for a complimentary consultation
This publication is for informational purposes only and has been prepared from public sources which are meant to be reliable. None of the information in this should be construed as investment advice. Speak to your Investment Advisor to learn if this product is right for you. Designed Securities Ltd. (DSL) is regulated by the Canadian Investment Regulatory Organization (CIRO), and a Member of the Canadian Investor Protection Fund (www.cipf.ca). Christopher Burke is registered to advise in securities to clients residing in Ontario. The views expressed are those of the author and not necessarily those of DSL. This report does not constitute an offer or solicitation in any jurisdiction in which such offer or solicitation is not authorized or to any reliable person to whom it is unlawful to make such offer or solicitation. Content is accurate as of the date of publication, and subject to change without notice.
