February 27, 2026 | Planning Matters | 5 min read
Spending Time Abroad in Retirement: Five Planning Tips Every Canadian Should Know
Many Canadians are choosing to spend part of their retirement outside the country, often chasing sun, family, or adventure. But living across borders can introduce tax and legal wrinkles that are easy to miss.
Below are five practical tips, written with real‑life scenarios to help you understand what to watch for before booking that one‑way flight.
1. Residency Rules: Why "Six Months + a Day" Isn't the Whole Story
Many Canadians believe that as long as they spend fewer than 183 days in the US per year, they remain Canadian residents for tax purposes. But Canadian residency is not determined by day‑count alone.
The rule is based on your ties, not just your travel. Specifically, the courts and CRA focus on where your “settled routine of life” takes place. They look at your home, your spouse, your belongings, and the continuity of your connections.
Example: Jim spends the winter in Palm Springs but keeps his Vancouver condo and BC driver’s license, and returns every Spring to be with family. Even though he’s abroad for four months at a time, CRA still views him as a Canadian resident because his primary ties remain here.
Key considerations include:
- A home available to you in Canada.
- Where your spouse/partner or dependants live.
- Secondary ties: personal property (furniture, clothing and cars), social ties (memberships, religious groups or family connection), economic ties (employment, bank and investment accounts, retirement savings plans, credit cards), and provincial driver's licences, vehicle registration, and medical insurance coverage.
- How regularly and why you return to Canada, and the extent of ties abroad.
Takeaway: You can be considered a Canadian resident even while living abroad for extended stretches if your ties remain strong.
2. The US Substantial Presence Test: Your Days Do Count, Just Differently Than You Might Think
If you spend time in the US, you should understand its residency test, called the Substantial Presence Test (SPT). The IRS calculates the SPT based on your physical days in the country over three years to determine if you should be considered a US resident for tax purposes.
To meet this test (note: not the goal), an individual must be physically present in the US for at least:
- 31 days during the current year, AND
- 183 days over the last three years, counting:
- All the days that you were in the US in the current calendar year, and
- 1/3 of the days you were in the US last year, and
- 1/6 of the days that was present in the year before that.
Example: Lila and Roberto winter in Arizona each year. They only stay about 122 days annually, but over three winters, the formula pushes them over the threshold. They technically trigger the SPT, even though they never spent 183 days in a single year.
If this happens and you are still clearly tied to Canada, you can:
- File Form 8840 (“Closer Connection Exception”) if you spent fewer than 183 days this year, or
- Rely on the Canada‑US tax treaty, filing Form 8833 to “treaty tie-break,” to claim Canadian residency.
Both filings help you avoid being taxed in the US on your worldwide income.
3. Owning Property in the US: Personal Use vs. Rental Matters
For Canadians purchasing condos in Arizona, Hawaii, Florida, or elsewhere in the US, tax obligations differ depending on how you use the property.
Personal Use Property
If you never rent it out:
- No US income tax filings are required during ownership
- You’ll still face US tax considerations when selling (FIRPTA withholding—see below)
Rental Property
If you rent it, the US gets first claim to tax the income.
Example: The Chens rent their Maui condo on Airbnb for eight weeks each winter. Their US property manager withholds 30% tax on gross rent—unless they file forms to be taxed on net income instead.
Key steps:
- Apply for an ITIN (US tax number)
- Choose between:
- The default 30% withholding on gross income, or
- Filing a US non‑resident tax return to deduct expenses and pay tax on net profit
- File state tax returns in most rental‑property states (Hawaii, Arizona, etc.)
Report US rental income again in Canada, using foreign tax credits to avoid double taxation
4. Selling US Property: Know the FIRPTA Rules
When selling US real estate, Canadians must comply with the Foreign Investment in Real Property Tax Act (FIRPTA).
- Typically, 15% of the gross sale price is withheld, regardless of your profit
- You file a US return to determine actual tax owed, then claim a refund if appropriate
- You must also report the sale in Canada and apply a foreign tax credit for US taxes paid
Example: When Jim sells his Florida condo for $600,000, FIFRPTA requires his buyer to withhold $90,000 at closing. His US tax on actual gain ends up only being $18,000, so he later receives a refund of the difference.
5. US Estate Tax: The Rules Changed - Here's What Canadians Should Know
Canadian residents (who are non-resident of the US) might have US estate tax exposure if their estate owns what’s called “US situs assets.” These assets include:
- US real estate
- US stocks, even if they’re held in RRSPs, TFSAs, or non‑registered Canadian accounts
- Tangible personal property like jewelry, boats or vehicles located in the US
As of January 1, 2026, the US’ One Big Beautiful Bill Act increased the estate tax exemption to US$15 million, and indexed it thereafter. This is a significant buffer for Canadians, but it doesn’t eliminate exposure.
Two thresholds matter:
- If your US situs assets exceed US$60,000, or
- Your worldwide estate exceeds the exemption and you hold US situs property
Tax rates reach up to 40%, although the Canada–US treaty generally allows foreign tax credits to reduce or eliminate double taxation with Canada’s own deemed‑disposition rules.
While Canada does not levy an estate tax, Canadian residents are deemed to have disposed of capital property upon death, and taxed on the capital gain. If a Canadian estate is subject to both US estate tax and Canadian income tax on deemed disposition on US situs assets, the US – Canada Income Tax Treaty provides relief to eliminate the potential double taxation with foreign tax credit claim in Canada. US estate tax returns (Form 706‑NA) are typically due within nine months of death.
Example: Roberto has US$800,000 of US stocks inside his RRSP. His worldwide estate is well above US$15 million. Even though the assets sit in a Canadian account, they remain “US situs assets” for estate tax purposes, creating potential exposure.
Final Thoughts: Plan Ahead Before You Pack Your Bags
Whether you’re spending winters down south, buying a vacation home, or planning to live abroad for longer periods, a proactive tax and legal plan can save thousands, and avoid surprises.
If you’d like help reviewing your residency ties, cross‑border holdings, or potential exposure, please reach out to your Leith Wheeler advisor.
About the Contributor
Kaman Kwok CGA, CPA, CPA (Vermont) is a Partner at Oasiss CPA Corp. where she advises clients on income, trust and estate tax matters for US citizens residing in Canada, relocation planning between US and Canada, US expatriation and divorce settlement tax planning, Canadians investing in the US, streamlined and voluntary disclosures on delinquent filing procedures in both US and Canada. She can be reached at kaman@cross-bordertax.com.
