Snowbird tax returns: the T1 and Form 8840 rhythm — and the years that break it

The rhythm: a T1 in April, Form 8840 in June

Most snowbirds owe exactly two filings a year: the Canadian T1 by April 30, and IRS Form 8840 by June 15. You remain a Canadian tax resident — five months in Florida does not change that — but US day-counting runs on its own track and has to be managed every single year.

The substantial presence test adds all of this year's US days, one-third of last year's, and one-sixth of the year before. A steady five-to-six-month winter pattern crosses 183 on that formula almost every year. Form 8840, the closer connection exception statement, is what keeps a person who crossed the count a US non-resident. It is not optional paperwork, and it is filed per person — each spouse needs one.

We track day counts with clients through the season and file the 8840 as routine annual hygiene, because the fallback — being treated as a US resident taxable on worldwide income, with foreign-account reporting attached — is an expensive place to argue back from.

The year you rent the place out

Renting the US home changes both countries at once, and the changes arrive in full in year one, not gradually.

• US side: gross rents face 30 percent withholding unless you elect net-basis taxation and give the property manager a Form W-8ECI — and either way, a 1040-NR becomes an annual filing. The mechanics are covered in our snowbird US property tax guide.
• Canadian side: the rent goes on Form T776 in Canadian dollars, with expenses prorated between rental weeks and the weeks you occupied the home yourself.
• T1135: a personal-use vacation home is exempt from foreign-property reporting; a rented one is not. If its cost passes CAD $100,000, T1135 starts the same year the first tenant does.

None of this changes your Canadian residency — it changes paperwork. The practical shift is that your file now has a permanent US side, so we set up the exchange-rate records, the personal-versus-rental expense split, and the manager statements properly in year one. Untangling three years of mixed use retroactively costs more than the returns themselves.

The sale year, on both sides

One closing produces two different gains. The US withholds 15 percent of the gross price under FIRPTA — a Form 8288-B filed before closing can cut that toward the real expected tax — and the sale-year 1040-NR reports the actual gain and recovers the difference.

Canada then computes its own gain in Canadian dollars, converting the purchase at the historical exchange rate and the sale at the current one. A condo bought when the currencies sat near par and sold with the US dollar at a premium shows a CAD gain well beyond the USD one — the currency move itself is taxable. US federal and state tax on the sale becomes a foreign tax credit against Canadian tax on the same gain, which is why the two returns should be prepared together, not sequentially by strangers.

Principal-residence designation: decide it, don't default it

A US home you ordinarily inhabit can be designated your principal residence for Canadian purposes — the exemption is not restricted to Canadian soil. The Form T2091 math shelters the gain in the proportion of one-plus-years-designated over years owned, but a family unit designates only one property per year: every Florida year you shelter is a year your Canadian house stands exposed.

Usually the Canadian home has gained more per year of ownership and keeps the designation, but a Sunbelt property bought cheaply decades ago can flip the answer. We run the comparison with real numbers in the sale year, before the designation is filed. The US offers no mirror-image relief here — its main-home exclusion rarely helps someone whose actual main home is in Brampton — so the Canadian designation is where the planning value lives.

Source: IRS — About Form 8840, Closer Connection Exception Statement for Aliens.