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, a spouse or common-law partner in Canada, dependents in Canada; any one of these alone is usually enough for Canadian tax residency regardless of how many days you spend there
• Secondary residential ties: personal property (car, furniture), social ties (club memberships), economic ties (bank accounts, credit cards, retirement accounts), Canadian driver’s license, passport, provincial health insurance
• Other ties: any fact connecting you to Canada, including 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 catches people who spend a consistent four months: 122 days per year produces 122 + 40.7 + 20.3 = 183, right at the threshold. If you meet the test, you are a US tax resident for the year, subject to tax on worldwide income.

A quick reference for common patterns (assuming the same day count each year; fractions rounded):

Days in the US per year	Weighted total	SPT met?
100	100 + 33 + 17 = 150	No
110	110 + 37 + 18 = 165	No
120	120 + 40 + 20 = 180	No
121	121 + 40.3 + 20.2 = 181.5	No
122	122 + 41 + 20 = 183	Yes
130	130 + 43 + 22 = 195	Yes
150	150 + 50 + 25 = 225	Yes
182	182 + 61 + 30 = 273	Yes

If you spend the same number of days in the US every year, 121 days (181.5 weighted days) is the most you can spend without meeting the test. At 122 days a year you meet it, though the closer connection exception below may still apply.

• The closer connection exception can override the result if you were present for fewer than 183 current-year days, maintained a tax home in a foreign country, and had a closer connection; claim it on Form 8840
• If you were present for 183 or more current-year days, the closer connection exception is unavailable; the treaty tie-breaker is the only remaining route

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. If you’re a citizen of both or neither, the two tax authorities settle it by mutual agreement.

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, and the penalty for failing to disclose a treaty-based position is $1,000 per failure under IRC 6712 ($10,000 for C corporations). 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?

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. This is where the split-time arrangement gets expensive. Article XV of the treaty allows the source country to tax employment income, with two narrow exceptions. Pay of $10,000 or less for the year (in the source country’s currency) is taxable only in the home country. Above that, the short-term exception requires all three conditions:

• The employee was present in the other country for no more than 183 days in total in any twelve-month period starting or ending in the fiscal year
• The remuneration is not paid by, or on behalf of, a resident of the other country
• The cost is not borne by a permanent establishment there

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, do not meet the substantial presence test, and have no US-source employment income (sourced to where the work is performed). The US does not tax you on it.

• The reverse also applies: remote work from the US for a Canadian employer sources income to the US; the remote work guide covers that version
• The split-time problem arises when you physically cross the border; days of physical presence matter, while video calls from one country to clients in the other do not create presence

What about state and provincial taxes?

Both layers add complexity. If you work in a US state, the state may tax income earned there independently of the federal analysis. New York, California, and several others have aggressive nonresident taxation rules, and some have their own day-count thresholds. 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
• The substantial presence test formula, the weighted three-year calculation and what counts as a day
• How does the CRA determine tax residency?, the residential ties test that decides whether Canada taxes your worldwide income

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