Still confused on how to determine residency in retirement

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Gilgamesh
Posts: 78
Joined: Tue Apr 02, 2019 5:30 pm

Still confused on how to determine residency in retirement

Post by Gilgamesh »

Ok! I’ve read quite a bit of this forum...I’ll post my summary findings so far as a reply. But, still not clear on how residency status is determined when I own homes in both countries, before and after retirement. We are both dual citizens.

Before retirement the only thing I will have in Canada is a residence. No cars there, a bank account with less than $10k balance. This should be easy and I can prove my USA residency. No need to file Canadian taxes if I am not renting the Canadian home. If I am renting the Canadian homes there are some reporting (I could learn the details later...if someone wishes they could detail it here).

I am confused on what happens after retirement. We will have Roth, tIRA accounts in USA. Initially no pension, but after age 60 we both get OAS, and after 62 my wife may get SS, after age 65 she will get CPP, after I turn 70 I will file SS and she will apply for spousal. We are a year apart. We will own homes both in USA and Canada and neither will be rented after retirement (prior to retirement the Canadian home/condo will be rented). Will have bank accounts in both countries and may even have vehicles registered and kept in each country.

I will retire at age 58-60. My plan is to stay as a USA resident unit I start drawing SS at age 70. We will spend months in Canada (how long depends on keeping my USA residency). Over this time I will be doing Roth conversion and capitalize on zero LTCG taxes and make most of my brokerage/taxable accounts almost all basis. So, when I liquidate that when I decide to become a Canadian resident I won’t pay much taxes.

After age 70, when I file for SS we would prefer to become Canadian residents (will maintain Medicare, probabaly part B,C as well...but need to study this option a bit more). By this time by tIRA will be minimal as most will be Roth, and most taxable will be basis so when I liquidate I won’t pay much taxes. This should result in no to minimal social security taxation (does Canada tax social security in an identical manner to USA...as in determine 50% taxation threshold frist and then 85% etc.?)

First, how do I make sure I will be considered only a USA resident after retirement from age 58-70 and then after age 70 how do I make certain I will be considered only a USA resident. As we may cross vis land, no passport proof of how many days I stayed in each place. Still unsure of days required too.

Also, at a certain point we will sell our Florida home....most likely 3 years after we become Canadian resdidence. Unsure on exactly taxes work out with this...
Gilgamesh
Posts: 78
Joined: Tue Apr 02, 2019 5:30 pm

Re: Still confused on how to determine residency in retirement

Post by Gilgamesh »

SUMMARY OF DUAL CITIZENS WHO’VE WORKED IN THE USA AND SETTLING BACK IN CANADA....THIS IS BASICALLY WHAT IVE GLEANED FROM READING THE FORUM.

- Can keep Roth and tIRA accounts. Need to do Roth conversion prior to move. All persons who moved to Canada during a year must file an election by April 30 of the following year (due date of return) to ensure that income earned within the Roth IRA from contributions made while a nonresident of Canada will be deferred, and considered "pension income" under the Treaty
- Filing Roth - Report the entire amount on Line 115 as a foreign pension, and then deduct the same amount on line 256 as exempt foreign income.
- Have to sell brokerage/taxable accounts
- Can keep USA bank account
- Only certain institutions can deal with a Canadian address, so make certain yours will or roll over accounts into one that can. With a USA address and being a Canadian resident, should not be an issue.
- Cannot Rollover from Roth to TFSA or Rollover tIRA to RRSP

- After age 65, even if you are a USA resident you could qualify for OAS. Based on number of years lived in Canada after age 18. Maximum benefit @ 40 years, others are prorated based on number of years. 10 year minimum required of a Canadian resident, 20 years if you are a USA resident. But years lived in USA can be used to meet these 10 & 20 year requirements - however benefits will only be based on number of years spent in Canada after age 18. OAC does not affect SS or CPP payments. USA residents are not subject to clawback.

- One can get SS, CPP and OAS whether one is Canadian or USA resident. However WEP adjustment may result in SS amount be reduced by as much as 50% of CPP amounts. This reduction does not apply to those with less than 40 SS credits or those with more than 30 years of substantial wages in USA

- If you are a USA citizen, you have to use USA passport while entering and exiting USA irrelevant of residency status. Canada is fine with using USA passport to travel to, within and out of Canada.

- As long as you are a USA citizen you have to always file USA taxes on worldwide income. However Canada and USA have tax treaties so you will not pay double tax.
- If one spouse has enough credits in USA Medicare part A, both will be eligible for life. Need to see whether it’s worthwhile keeping other parts after becoming a Canadian resident.

UNKNOWN
- What happens when I sell a home in the USA after becoming a Canadian resident? Home bought while I was a USA resident. How is capital gains treated? Do I need to track anything from the day I purchase to selling - property taxes paid etc? It looks like Canada will give $250k capital gains exception for each couple, only if I sell within 3 years of leaving USA. What happens if I become a Canadian resident and sell USA home ten years later?
- I know a Canadian home, while being a USA resident assumes Canadian residency as well, unless proven otherwise - how do I prove this in retirement? No job in either country. Bank accounts in both. Vehicles in both countries. There are no passport proof of entry and exit, so how do I show I actually stayed most of my time in USA? This is still confusing.
- SPIA annuity purchase - can it only be purchased in country if residency? After purchase will it still pay if moved to the other country?
Gilgamesh
Posts: 78
Joined: Tue Apr 02, 2019 5:30 pm

Re: Still confused on how to determine residency in retirement

Post by Gilgamesh »

Made a mistake with my frist post...after age 60 my wife will get CPP and after age 65 we both get OAS...reversed it on my first post, sorry!
Gilgamesh
Posts: 78
Joined: Tue Apr 02, 2019 5:30 pm

Re: Still confused on how to determine residency in retirement

Post by Gilgamesh »

Oh! I also read somewhere (a CPA website) that there was no OAS clawback as a USA resident.
nelsona
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Re: Still confused on how to determine residency in retirement

Post by nelsona »

Very good. You have recapped what I have stated here for 15 years.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
Gilgamesh
Posts: 78
Joined: Tue Apr 02, 2019 5:30 pm

Re: Still confused on how to determine residency in retirement

Post by Gilgamesh »

nelsona wrote:
> Very good. You have recapped what I have stated here for 15 years.

Thanks...yes! Most of that information came from your previous posts 😀

Any idea on how I could prove my USA tax residency status from retirement (58-60) to age 70? And then prove Canadian residency after age 70. Will have homes, cars and bank accounts in both countries. Not working in either. Retirement accounts in USA. Drawing SS, OAS and CPP fro my wife (I don’t think my summer Pizza Hut and macD jobs amounted to much, although a couple of summers I worked in a factory making mufflers).

I am planning to live more than 6 months (186 days) in the USA when I would like to be treated as a USA resident and do the reverse when I want to be a Canadian resident...is this enough? What if I don’t spend 186 in either country (say spend a couple of months on vacation in a third )...how do I prove days spent in each country when there’s no passport entry.

One big difference...when I am a USA resident I will of course not have Canadian medical insurance (have to buy insurance when I visit there and stay for months), and when I become a resident of Canada in 70 will get Ontario health (but will have Medicare too).

Any links to resources is great too...everything I’ve read is so confusing as most seems to apply to aliens and not USA citizen.

Thanks!
Gilgamesh
Posts: 78
Joined: Tue Apr 02, 2019 5:30 pm

Re: Still confused on how to determine residency in retirement

Post by Gilgamesh »

I will post what I u derstand by reading the ‘the substantial presence test’ and Canada’s rules including ‘deemed non-resident’ post, but it could be all wrong.
Gilgamesh
Posts: 78
Joined: Tue Apr 02, 2019 5:30 pm

Re: Still confused on how to determine residency in retirement

Post by Gilgamesh »

Test to see whether I am considered a Canadian resident from retirement (age 58-60) to 70. I do not want to be considered a Canadian resident for taxes.

Step 1:
Yes, I have a home in Canada
My wife and I live more days in USA than Canada, and no dependents in Canada.

So, the first step is a mixed bag.

Step 2: I will have furniture and car in Canada
I may have memberships in Canada. So social ties is a yes
Will have Canadian bank accounts, but no credit cards (may be I will get CC to establish credit history)
No Canadian drivers license
Definitely have a Canadian passport
No health insurance...

So, second step is a mixed bag, but definitely but several ties to Canada...this doesn’t look good

I am hoping then I can go to the next step...will I be put into this category “If you established ties in a country that Canada has a tax treaty with and you are considered a resident of that country, but you are otherwise a factual resident of Canada, meaning you maintain significant residential ties with Canada, you may be considered a deemed non-resident of Canada. The same rules apply to deemed non-residents as non-residents of Canada”

So, what is “deemed non-Resident” and do I qualify? I have no idea...so I’m stumped

(in the next post I’ll try to post whether I know about trying to be a non-resident of USA after age 70, when I want to be a Canadian resident.
Gilgamesh
Posts: 78
Joined: Tue Apr 02, 2019 5:30 pm

Re: Still confused on how to determine residency in retirement

Post by Gilgamesh »

So, will I be considered a USA resident from age 70 till death (I do t want to be a USA resident for tax purposes -mostly because I want to qualify for Canada health insurance. But also to know how to file taxes).

SUBSTANTIAL PRESENCE TEST
I am sure I’ll fail this, as I will spend more than 183 days for 3 years after I apply the formlula

CLOSURE CONNECTION EXEMPTION - FROM 8840.
- Yes for present is USA for less than 183 days
- yes for home in Canada
- then the doozie - so generic - “closer connection to Canada”...WTH?

I have homes in both countries, I have belongings in both, banking in both.

However, most of our extended family is in Canada...I will have Canada health after age 70...I could look into getting Canadian drivers license after age 70. Will this make me a Canadian resident...

Finally should I even worry about trying to become a Canadian resident after age 70? The only thing I need is Canadian health (so it’s only fair I pay taxes there), but anything else? Roth, tIRA, HSA still in USA will be getting OAS & CPP for wife.

Am I missing something?
nelsona
Posts: 18314
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: Still confused on how to determine residency in retirement

Post by nelsona »

once you have a place in both countries, the IRS/CRA rules go out the window. Forget SPT and 183-day rule.

it will be strictly on where you have most of your vital interests. The best test will be whether you (want to) qualify for Provincial health. If you want to, you will need to spend the required amount of time there AND be a tax resident. This will decide it.

But be aware that once you establish sufficient ties in US, you will not be considered a Cdn resident, until you outweigh those .

A deemed non-resident, is a person with Cdn primary ties, but who meets the treaty definition of a resident of a treaty country (by first meeting there residency rules, and outweighing their Cdn ties with ties to that country. This of it as CRA's version of 8840.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
Gilgamesh
Posts: 78
Joined: Tue Apr 02, 2019 5:30 pm

Re: Still confused on how to determine residency in retirement

Post by Gilgamesh »

Ok! ... so, it sounds like ‘vital interest’ after retirement (no job) is easier to prove residency for USA when I’m here mostly...Even though I have homes, furniture, cars, club memberships, bank accounts and credit cards in both places, because I have health insurance, and all my retirement accounts in USA and spending most of my time here is good enough for Canada to say I am not a resident there. I guess that’s when I file from 8840 and be a deemed non-resident. I can see how this can be done.

Now, at age 70 when I want to come back to Canada and get Canadian health insurance I’ll still have homes, furniture, cars, club memberships, bank accounts and credit cards in both places, however now I will spend more time in Canada...if it will help I’ll give up my USA drivers license and get Canadian license. Is this and spending enough time in Canada be enough to be a Canadian resident? I still have retirement accounts in USA (not Canada), most of my income comes from those and social security. I will have Medicare, and only very meager amounts will come from CPP and OAS

> it will be strictly on where you have most of your vital interests. The
> best test will be whether you (want to) qualify for Provincial health. If
> you want to, you will need to spend the required amount of time there AND
> be a tax resident. This will decide it.

Yes! I do want to get provincial Health, then you say I need to spend the required amount of time? What is that time? Given - I will have gone from not having Canadian drivers license to having one, and then what amount of time do I have to spend in Canada to go from being a USA resident to Canadian resident and get provincial health? When I don’t have much income coming from Canadian sources...

Do I have to move my Roth to A Canadian brokerage account (I know it will not be tax sheltered)...or is changing drivers license and spending more time in Canada good enough?

Thanks!
Gilgamesh
Posts: 78
Joined: Tue Apr 02, 2019 5:30 pm

Re: Still confused on how to determine residency in retirement

Post by Gilgamesh »

I guess by “required amount of time” you meant required amount of time to qualify for provincial health insurance...ok that makes sense...but it almost sounds like a circular argument.

I can stay in Canada long enough to qualify for provincial health, but it also requires me to be a tax resident of Canada, but to be a Canadian tax resident I need to have provincial healthcare ...chicken and egg kinda thing...

Given my situation, how can I become a Canadian resident and apply for provincial health...I will stay in Canada as long as necessary, and get Canadian health but homes, furniture, cars, club memberships, bank accounts and credit cards will be in both places and most of my income will come from Roth, SS and very little from CPP OAS.
Gilgamesh
Posts: 78
Joined: Tue Apr 02, 2019 5:30 pm

Re: Still confused on how to determine residency in retirement

Post by Gilgamesh »

I guess I could cancel my USA credit cards too when I want to become a Canadian resident and qualify for provincial health.
Gilgamesh
Posts: 78
Joined: Tue Apr 02, 2019 5:30 pm

Re: Still confused on how to determine residency in retirement

Post by Gilgamesh »

OHIP (ontario provincial health) says I need to be in the province 153 days of the frist 186 days Immediately after I establish residency and then 153 days in any 12 month period...I have no problems with staying any 153 days or even more. I could even stay for a whole year.

However, What does ‘establishing residency’ mean? Tax residency?...BUT Tax residency requires provincial health...This cannot be? Each one requires the other to be given...
Gilgamesh
Posts: 78
Joined: Tue Apr 02, 2019 5:30 pm

Re: Still confused on how to determine residency in retirement

Post by Gilgamesh »

I just learned that even if I cross by land IRS and CRA will know how many days I spent in each country....so, I guess if I fly out to a 3rd country from there, they keep track of that too???
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