I Split My Time Between Canada and the US. Where Do I Actually Pay Taxes?

Both countries, potentially. The “183-day rule” that most people cite is a simplification that combines two different tests from two different systems into one number and then applies it incorrectly. Canada determines tax residency based on residential ties, not day counts. The US uses a weighted day count (the substantial presence test), but it runs across three years, not one. You can be a tax resident of both countries at the same time, and if you are, the treaty tie-breaker decides which country gets primary taxing rights, but you have to claim it, and it does not eliminate filing obligations in the other country.

How does Canada determine tax residency?

Canada does not use a bright-line day count. The Income Tax Act does not define residency; the test comes from case law (Thomson v. MNR, 1946) and CRA administrative practice (IT-221R3, now replaced by the CRA’s web guidance on factual residency). The test is factual: where is your settled routine of life?

The CRA looks at residential ties, grouped into three categories:

Significant residential ties. A dwelling available to you in Canada (owned, rented, or available for your use). A spouse or common-law partner in Canada. Dependents in Canada. Any one of these, standing alone, is usually enough to make you a Canadian tax resident regardless of how many days you spend in the country.

Secondary residential ties. Personal property in Canada (car, furniture). Social ties (club memberships, religious organization). Economic ties (Canadian bank accounts, credit cards, retirement accounts). Canadian driver’s license. Canadian passport. Provincial health insurance coverage.

Other ties. Any fact that connects you to Canada, including the frequency and regularity of visits.

A person who keeps a home in Toronto, has a spouse in Toronto, and spends eight months a year in Florida is still a Canadian tax resident. The 183-day myth leads people to believe they can count their way out of Canadian residency, but the CRA does not count days the same way. If the significant ties are there, residency follows, and NR73 is the form you would use to get the CRA’s determination.

How does the US determine tax residency?

The US uses a mechanical test: the substantial presence test under IRC 7701(b)(3). You meet it if you were present in the US for at least 31 days in the current year and 183 weighted days across three years. The weighting: current-year days count in full, prior-year days at one-third, the year before that at one-sixth.

The formula matters because someone who spends 120 days a year in the US, every year, meets the test: 120 + (120 / 3) + (120 / 6) = 120 + 40 + 20 = 180. Not quite 183. But push it to 122 days: 122 + 40.7 + 20.3 = 183. Four months a year, every year, is enough to meet the test.

If you meet the test, you are a US tax resident for the year, subject to tax on worldwide income. The closer connection exception can override the result if you were present for fewer than 183 current-year days, you maintained a tax home in a foreign country, and you had a closer connection to that country. You claim it on Form 8840. The snowbird guide works through that exception in detail.

If you were present for 183 or more current-year days, the closer connection exception is not available. At that point, the treaty tie-breaker is the only remaining route to avoid US residency for the year.

What happens if I am a resident of both countries?

You are a dual resident. Both countries claim you as a tax resident, and both expect a return reporting worldwide income. Without intervention, you would be double-taxed on everything.

Article IV of the Canada-US tax treaty provides a tie-breaker. The tie-breaker tests, in order:

1. Permanent home. If you have a permanent home available to you in only one country, you are a resident of that country.
2. Centre of vital interests. If you have a permanent home in both countries, you are a resident of the country where your personal and economic relations are closer.
3. Habitual abode. If the centre of vital interests cannot be determined, you are a resident of the country where you have a habitual abode (where you spend more time).
4. Citizenship. If you have a habitual abode in both or neither, citizenship breaks the tie.

The tie-breaker determines which country is the “resident” country for treaty purposes and which is the “other” country. The resident country taxes your worldwide income. The other country generally taxes only income sourced within its borders, though it retains the right to tax certain categories (like real property income and employment income for work performed there).

The tie-breaker is not automatic. In the US, you claim it on Form 8833, Treaty-Based Return Position Disclosure. You file a Form 1040-NR (nonresident return) instead of a Form 1040, and you attach the 8833 explaining that you are invoking Article IV to be treated as a nonresident. On the Canadian side, if the tie-breaker favors the US, you would file a Canadian return as a nonresident or deemed nonresident, reporting only Canadian-source income.

What about income from work performed in the other country?

This is where the split-time arrangement gets expensive. Even if the treaty tie-breaker makes you a resident of one country, the other country can still tax employment income for days worked on its soil.

Article XV of the treaty allows the country where work is performed to tax the employment income, with a limited exception: if the employee was present in the other country for fewer than 183 days in the twelve-month period starting or ending in the fiscal year, the remuneration is paid by or on behalf of an employer who is not a resident of the other country, and the remuneration is not borne by a permanent establishment the employer has in the other country, then the employment income is taxable only in the resident country.

For a split-time worker, this exception often does not apply. If your employer has an office in both countries and you work from both locations, the remuneration is usually borne by an establishment in both countries, and the exception fails. The result: employment income is sourced to each country based on the days worked there, and you file in both countries with foreign tax credits to prevent double taxation.

The sourcing is typically pro-rated by days: (days worked in Canada / total working days) times total compensation gives the Canadian-source amount, and the remainder is US-source. Each country taxes its sourced portion, and the resident country gives a credit for tax paid to the other country on the other’s sourced income.

What if I work remotely and never cross the border?

Remote work from Canada for a US employer (or vice versa) is a different analysis. If you physically work from Canada and never enter the US, you do not accumulate US presence days. You do not meet the substantial presence test. There is no US-source employment income (the income is sourced to where the work is performed, which is Canada). The US does not tax you on it.

The reverse is also true: if you work remotely from the US for a Canadian employer, the income is sourced to the US (where the work is performed), and the remote work guide covers that version.

The split-time problem arises when you physically cross the border to work. Days of physical presence matter. Video calls from one country to clients in the other do not create presence in the other country.

What about state and provincial taxes?

Both layers add complexity. If you work in a US state, the state may tax your income earned there independently of the federal analysis. New York, California, and several other states have aggressive nonresident taxation rules. Some states have their own day-count thresholds for residency. The Ontario-to-Florida and BC-to-California guides cover specific corridors.

On the Canadian side, provincial tax is assessed based on the province where you reside on December 31 (or the last province of residence if you departed mid-year). If the tie-breaker makes you a US resident for treaty purposes, provincial tax may still apply on Canadian-source income reported as a nonresident.

What should I do next?

Count your days for the last three years. Run the substantial presence test to see if you are a US tax resident. Check your Canadian residential ties to see if you are a Canadian tax resident. If the answer is both, determine which side the treaty tie-breaker favors based on your permanent home, centre of vital interests, and habitual abode. File accordingly in both countries, claim the tie-breaker on Form 8833, and make sure the foreign tax credits line up.

• How many days can a Canadian snowbird spend in the US?, the closer connection exception and Form 8840 in detail
• Do I need to file Form 8840?, the specific form that claims the closer connection
• Am I still a Canadian tax resident?, the Canadian residential ties analysis
• When do I need Form 8833?, the treaty disclosure that makes the tie-breaker work

This guide is general information, not tax advice for your specific situation. Which points apply, and how, depends on your facts.