Most retirees who make the annual pilgrimage to the sunshine states already know how long they're allowed to stay in the United States without making immigration officials testy: fewer than 183 days.
But that limit could change – maybe just not this year.
Last summer, the U.S. Senate passed immigration legislation that stated Canadian retirees 55 and older who were willing to spend at least $500,000 on a residence could spend up to 240 days in the United States without a visa – almost two months longer than the current limit. While the legislation eventually died in the House of Representatives, Roy Berg, director for U.S. tax law at Moodys Gartner in Calgary, says he's convinced that the JOLT Act (Jobs Originated through Launching Travel) will eventually become law. It's just a matter of time.
The so-called "Canadian retiree visa" is a revenue raiser for the American economy, he explains, initially proposed in 2011 (and carted out each year since) to sweeten the pot for wealthy Canadians who might be tempted to buy real estate south of the border.
"Will the snowbird visa come around? I think so. Why? Because they keep proposing it," Mr. Berg says. "It will be resurrected next year just like it was last year."
Perhaps the delay isn't such a bad thing, however. According to some financial advisers and tax lawyers, there could be some potentially serious and financially brutal repercussions for snowbirds who are unaware of all the tax and health-care issues that go along with the legislation. By having another year to get educated, they could save themselves headaches and money.
The primary problem?
"The tax laws are not lined up with the immigration laws," says Abby Kassar, vice-president of high-net-worth planning services at RBC Wealth Management in Toronto.
In other words, just because from an immigration standpoint, you're allowed to stay in the United States for up to eight months, it doesn't necessarily mean the taxman will turn a blind eye. Just the opposite, Mr. Berg says. In fact, he goes so far as to call the snowbird visa "a trap" and even a "tax bomb" for the unwary because it can automatically turn a Canadian into a U.S. resident, subject to tax on worldwide income.
The formula for determining U.S. residency can be complicated. Take the number of days you were in the United States this year, a third of the days you visited last year and one sixth of the number of days the year before. If you come up with an average of at least 120 days over the three years, you are a resident. The same applies if you're in the United States for 183 days or more in one year.
Snowbird, say hello to the Internal Revenue Service.
"These visas say you have to be in the U.S. for at least 180 days in a calendar year and no more than 240. You're going to be a U.S. resident so you have all the tax and filing obligations that U.S. people do," Mr. Berg says.
Although there are ways to offset tax in another jurisdiction – snowbirds are often advised to file a Form 8840, Closer Connection Exception statement with the IRS – it doesn't always work out cleanly. For instance, some people are unaware they're U.S. residents and fail to file a foreign bank account report.
"That's a $10,000 ticket. Between the U.S. and Canada, it's not the taxes that are the killer, it's the penalties for failing to file," Mr. Berg says.
Then there's estate tax. As a U.S. resident with property, if you were to die, you would not be taxed on capital gains, as you are in Canada, but on the total value of your assets. This can have a huge impact on wealthy Canadians with assets at the date of death of more than $5,250,000, since they're taxed at 40 per cent, Mr. Berg says.
And don't forget Canadian departure taxes, which are also based on residency. If you are no longer considered a resident in Canada, you're deemed to have sold all of your assets and you must pay taxes on your capital gains. In effect, the Canada Revenue Agency treats you as though you've died.
"So you get a snowbird visa, you're fat and happy living down in the U.S. for 240 days – and then you get a knock on the door from the CRA that says, 'Hey, where's our money?' " Mr. Berg says. "That's a super nasty surprise."
The possibility of losing provincial health-care coverage already keeps snowbirds up at night, and the retiree visa wouldn't help. Currently if someone is out of province for more than six months, they may no longer qualify until they establish Canadian residence again.
Again, staying past that 182-day mark very possibly means losing coverage, Ms. Kassar says.
"From the Canadian perspective, we have provincial health-care programs that are in line with the immigration laws, but this throws that off. The question is, will [health-care rules] be changing in the future to accommodate the changes in the U.S.?" she asks.
Thinking that when the retiree visa eventually comes to fruition, you'll find a way to fudge the time you live south of the border to avoid taxes and penalties, and keep your health-care coverage? Think again. This coming summer, as part of the new joint entry/exit system between Canada and the United States, border officials will be tracking not only when you enter each country by land, air or sea, but also when you leave. Until now, countries only tracked entry.
It will be much harder to cheat the system, explains Mr. Berg. Canada can tell whether you're no longer eligible for provincial health-care coverage, and the United States can tell whether people have become illegal aliens or residents.
"It's going to change everything," he says. "You're going to have to swipe in and swipe out."