Immigration Law and Cross-Border Tax

Your Compass To Government Regulations​

For snowbirds and expats alike, it’s easy to get tax and immigration laws mixed up. Before you get tangled up in the details or lost in the paperwork, make sure you know the difference and have the right tools to help you navigate each situation, no matter which side of the border you’re on.

Canadians Migrating South

Canadians staying in the US might hear the term “rolling 12-month calendar,” referring to a visit for up to 182 days in a rolling 12-month period, and think that means there’s a limit to visa approval. The reality is that most visas initially grant 6-month status (the approved admittance period before needing to exit and re-enter the US), but there technically isn’t a limit to how long you can stay. You can apply for as many extensions as you want; visa approval depends on the border patrol agent’s discretion and their assessment of the intent of your visit, so in theory, you could be granted a much longer beach vacation than 182 days.

For those wanting a more flexible, extensive visit down south without the hassle of a green card, the E2 visa is a great option. E1 and E2 visas are both based on CA/US trade agreements, with the E2 pertaining to investing in the US. With it, snowbirds are granted 2-year status when expanding, starting, or purchasing a business in the US. You’ll need to reapply for your E2 visa every five years.

Americans Migrating North

For Americans immigrating to Canada, it’s important to understand that owning a home north of the border does not equal permanent residence or any exceptions to visitor rules. You’ll still need to go through the immigration process to have your status approved for more than six months at a time, although you may be able to extend your status.

US citizens who marry Canadians have two options for residency: one is to enter Canada together, with the American partner entering as a visitor and then changing their intention to “permanent.” After this, the American spouse may apply for a Spousal Open Work Permit. The other option is to apply while still in the US, which means you’ll need to wait for approval before crossing the border.

To become eligible for citizenship, you need to achieve the status of temporary resident, protected person, or permanent resident and be physically present in Canada for at least 1,095 days in the five years immediately before applying for citizenship. Accurately tracking your days and accounting for all days spent outside of the country is crucial for a successful application. Take the headache out of the process by downloading the Canada Physical Presence Tracker!

Tax Considerations for Canadians in America

Getting stuck in a tax trap can put a serious damper on your trip across the border. While Canadians can extend their visas, status doesn’t mean tax exemption. The IRS uses the Substantial Presence Test to count your days spent in the US. This test counts a 31-day visit in the current calendar year and 183 days spent in the US during the current year and the two years prior on a weighted basis. If your total is more than 182 days, the IRS considers you a US citizen for tax purposes.

There are two ways you can avoid owing Uncle Sam. If your Substantial Presence Test results land you in tax-paying territory, you can file Form 8840, the Closer Connection form, to establish that you have closer ties to Canada than the US. The second way to avoid the hassle is to easily track your visit and avoid overstaying in the first place! Download the Snowbirds US Day Tracker app to make your great escape stress-free.

Tax Considerations for Americans in Canada

Unless US expats are below the filing requirement income level ($12,550-$14,250 for those filing singly and $25,100-$27,800 for married filing jointly), they should file taxes with the IRS according to various circumstantial stipulations. US taxpayers with more than $10,000 in foreign bank or financial accounts also need to file an  FBAR.

A major tax trap for Americans to be aware of is using Canadian Tax-Free Savings Accounts. These accounts are not tax-free for US citizens and require filling out some of the most complicated foreign investment forms involved in US tax filing.