We often get inquiries from Canadian citizens who make frequent or lengthy trips to the United States annually. They have heard about a so-called “180-day rule” that allows a Canadian visitor to visit the U.S. for the maximum period of 180 days.
Although many Canadians citizens do not get a passport stamp or entry document that authorizes entry for a specific term, U.S. Customs and Border Protection (CBP) takes the position that Canadians citizens are deemed to be admitted for a maximum of six months. However, CBP may stamp a passport allowing a much shorter period of admission (only 5 days, two months, etc), in the situation where a Canadian citizen travels often to the U.S. which raises questions that he or she is not merely a visitor.
A person is in violation of the immigration laws if he or she does not depart the United States within the six-month limit (or whatever period is allowed by CBP), thereby becoming deportable and ineligible for other immigration benefits. Longer periods of overstay and unlawful presence of over a year can lead to a ban for 10 years.
But that rule has nothing to do with the person who makes frequent short visits that aggregate 180 days or more during the year. A Canadian citizen could theoretically come across (and depart) as a visitor every day and accumulate 365 days of presence in the United States without raising any concerns about overstay or unlawful presence. Such a pattern could certainly lead to more CBP scrutiny at the border as to the nature of the visits, to rule out the possibility that the person is working or living illegally in the United States.
Immigration rule summary: A Canadian citizen should not remain in the United States continuously for more than six months as a visitor (or longer than the admission period allowed by the CBP, if CBP allowed a shorter period of admission to USA). Aggregate time frames in excess of six months do not violate any immigration law, but they might create more CBP scrutiny at the border, requiring the person to prove how he or she qualifies as visitor, to prove that they do not work in the United States. For the business visitor, this might require some advance planning and the implementation of record-keeping techniques that easily and credibly explain the number, nature, and duration of prior trips.
The second part of the “180-day rule” relates to U.S. tax issues. If you spend too much time in the United States you can be deemed a resident for U.S. federal income tax purposes, requiring to file a U.S. income tax return and report all worldwide income even if there is no earned income in the United States or any other activity that would require a U.S. tax filing.
The IRS uses a “substantial presence” test to determine if someone is a resident for U.S. federal income tax purposes in a given calendar year. The “substantial presence” test is a mechanical formula based solely on the number of days on which an individual is present in the United States. The formula is applied to make a determination each calendar year. To be classified as a U.S. resident under the substantial presence test for a particular year, an individual must be physically present in the United States on at least 31 days of the current calendar year, and the sum of the following must equal 183 or more days: 1) all days in the United States in the current year, plus 2) one-third of the days in the immediately preceding year, plus 3) one-sixth of the days in the second preceding year.
The general rule of thumb is to keep presence in the United States under 120 days each year. (The designation “resident” for federal income tax purposes has nothing to do with immigration status or actual place of domicile; it just means that the person must file a U.S. resident return and report his or her worldwide income.)
Thus, someone who consistently visits the United States for around 180 days a year is going to satisfy the substantial presence test and be deemed a U.S. resident for federal income tax purposes. That isn’t the end of the analysis, however, because there are exceptions, including the “closer connection” and “tie-breaker” rules under the Internal Revenue Code and U.S.-Canada Tax Treaty that may allow the person to avoid being subject to U.S. tax on their worldwide income even if the actual number of days creates substantial presence.
The closer connection exception is only available if the individual is present less than 183 days in the current year. In order to claim the application of one of these exceptions, the individual is required to affirmatively file a tax return or other information statement with the IRS. The closer connection exception is generally preferred because it does not require additional information filings with the IRS as does the treaty exception.
Tax rule summary. A person will not be considered a resident for U.S. federal income tax purposes if he or she keeps the number of days in the United States to under 120 days on a consistent basis. Individuals who do satisfy the substantial presence test may nevertheless still avoid residency status under the closer connection or treaty tie-breaker rules (though they do not avoid U.S. tax filings altogether).
It is a good rule of thumb to keep visits to USA to less than 120 days annually. If that is not possible, the Canadian visitor should keep presence under 183 days so that he or she can elect the closer connection exception if otherwise applicable to the Canadian’s situation. An over-simplistic approach might lead to unintended consequences or lost opportunities.
Please note that this overview is provided for general information purposes only, and should not be considered legal advice. To receive advice regarding your tax liability you should consult a professional who specializes in taxation. Our firm only deals with immigration matters.
Although many Canadians citizens do not get a passport stamp or entry document that authorizes entry for a specific term, U.S. Customs and Border Protection (CBP) takes the position that Canadians citizens are deemed to be admitted for a maximum of six months. However, CBP may stamp a passport allowing a much shorter period of admission (only 5 days, two months, etc), in the situation where a Canadian citizen travels often to the U.S. which raises questions that he or she is not merely a visitor.
A person is in violation of the immigration laws if he or she does not depart the United States within the six-month limit (or whatever period is allowed by CBP), thereby becoming deportable and ineligible for other immigration benefits. Longer periods of overstay and unlawful presence of over a year can lead to a ban for 10 years.
But that rule has nothing to do with the person who makes frequent short visits that aggregate 180 days or more during the year. A Canadian citizen could theoretically come across (and depart) as a visitor every day and accumulate 365 days of presence in the United States without raising any concerns about overstay or unlawful presence. Such a pattern could certainly lead to more CBP scrutiny at the border as to the nature of the visits, to rule out the possibility that the person is working or living illegally in the United States.
Immigration rule summary: A Canadian citizen should not remain in the United States continuously for more than six months as a visitor (or longer than the admission period allowed by the CBP, if CBP allowed a shorter period of admission to USA). Aggregate time frames in excess of six months do not violate any immigration law, but they might create more CBP scrutiny at the border, requiring the person to prove how he or she qualifies as visitor, to prove that they do not work in the United States. For the business visitor, this might require some advance planning and the implementation of record-keeping techniques that easily and credibly explain the number, nature, and duration of prior trips.
The second part of the “180-day rule” relates to U.S. tax issues. If you spend too much time in the United States you can be deemed a resident for U.S. federal income tax purposes, requiring to file a U.S. income tax return and report all worldwide income even if there is no earned income in the United States or any other activity that would require a U.S. tax filing.
The IRS uses a “substantial presence” test to determine if someone is a resident for U.S. federal income tax purposes in a given calendar year. The “substantial presence” test is a mechanical formula based solely on the number of days on which an individual is present in the United States. The formula is applied to make a determination each calendar year. To be classified as a U.S. resident under the substantial presence test for a particular year, an individual must be physically present in the United States on at least 31 days of the current calendar year, and the sum of the following must equal 183 or more days: 1) all days in the United States in the current year, plus 2) one-third of the days in the immediately preceding year, plus 3) one-sixth of the days in the second preceding year.
The general rule of thumb is to keep presence in the United States under 120 days each year. (The designation “resident” for federal income tax purposes has nothing to do with immigration status or actual place of domicile; it just means that the person must file a U.S. resident return and report his or her worldwide income.)
Thus, someone who consistently visits the United States for around 180 days a year is going to satisfy the substantial presence test and be deemed a U.S. resident for federal income tax purposes. That isn’t the end of the analysis, however, because there are exceptions, including the “closer connection” and “tie-breaker” rules under the Internal Revenue Code and U.S.-Canada Tax Treaty that may allow the person to avoid being subject to U.S. tax on their worldwide income even if the actual number of days creates substantial presence.
The closer connection exception is only available if the individual is present less than 183 days in the current year. In order to claim the application of one of these exceptions, the individual is required to affirmatively file a tax return or other information statement with the IRS. The closer connection exception is generally preferred because it does not require additional information filings with the IRS as does the treaty exception.
Tax rule summary. A person will not be considered a resident for U.S. federal income tax purposes if he or she keeps the number of days in the United States to under 120 days on a consistent basis. Individuals who do satisfy the substantial presence test may nevertheless still avoid residency status under the closer connection or treaty tie-breaker rules (though they do not avoid U.S. tax filings altogether).
It is a good rule of thumb to keep visits to USA to less than 120 days annually. If that is not possible, the Canadian visitor should keep presence under 183 days so that he or she can elect the closer connection exception if otherwise applicable to the Canadian’s situation. An over-simplistic approach might lead to unintended consequences or lost opportunities.
Please note that this overview is provided for general information purposes only, and should not be considered legal advice. To receive advice regarding your tax liability you should consult a professional who specializes in taxation. Our firm only deals with immigration matters.
Toronto, Ontario, Canada
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