The Closer Connection Exception: How Form 8840 Keeps a Canadian Snowbird From Becoming a US Tax Resident

Short version: Form 8840: The Closer Connection Exception for Snowbirds

A Canadian who spends four months a year in Florida meets the US substantial presence test after three winters. Without the closer connection exception, that person is a US tax resident, taxable on worldwide income and subject to FBAR and Form 8938. The exception lets them stay a non-resident by showing that their tax home and their life remain in Canada, but it has a hard day limit, a filing deadline, and a disqualifier that catches anyone who has started the green card process.

Key takeaways

• The substantial presence test counts all days in the current year, one-third of the prior year's days, and one-sixth of the year before. 122 days a year for three years meets it.
• The closer connection exception requires all three: fewer than 183 days in the US in the current year, a tax home in a foreign country for the whole year, and a closer connection to that country than to the US.
• It is claimed on Form 8840, filed by the due date of a Form 1040-NR (June 15 for a non-resident with no US wages). A late Form 8840 generally forfeits the exception.
• It is not available to anyone who has applied for a green card or taken steps toward one.
• The treaty tie-breaker is the fallback if the exception is unavailable, but it requires filing a Form 1040-NR with Form 8833 and produces a different set of obligations.

The substantial presence test

The weighted three-year count is the trap for snowbirds. Someone who spends 120 days in the US each year has 120 + 40 + 20 = 180 days in the third year and is under the threshold; someone who spends 125 days has 125 + 42 + 21 = 188 and is over. Exempt days (medical conditions arising in the US, commuting days for regular commuters, days in transit under 24 hours) are excluded, but ordinary vacation days are not.

The three requirements

Fewer than 183 days in the current year. This is a hard limit. A snowbird who stays 183 days or more in any single year cannot use the exception for that year regardless of connections, and becomes a US resident unless the treaty tie-breaker applies.

Tax home in a foreign country. Your tax home is your regular or principal place of business, or if you have none, your regular place of abode. For a retiree, it is where you live. A snowbird with a Canadian home and a Florida condo has a Canadian tax home if the Canadian home is the principal one.

Closer connection to the foreign country. The regulations list the factors: location of your permanent home, family, personal belongings, social, political, cultural, and religious organizations, business activities, driver's licence, voter registration, and the country of residence you designate on forms and documents. A Canadian with a Canadian home, family, driver's licence, health card, bank accounts, and voting record has a closer connection to Canada even with a Florida condo.

Form 8840

Form 8840 is filed annually, either attached to a Form 1040-NR if one is required or on its own by the 1040-NR due date (June 15 for a non-resident without US wages, April 15 with them). It reports days present in each of the three years, the tax home, and the connection factors. The IRS can deny the exception to a taxpayer who does not file it on time unless the failure was due to reasonable cause, and in practice a late Form 8840 is a weak position.

The green card disqualifier

Anyone who has applied for lawful permanent residence, or taken affirmative steps toward it (an I-130 or I-140 petition filed on their behalf, an I-485 application, a labour certification), cannot claim the closer connection exception. A snowbird whose US-citizen child files a family petition loses the exception from that year.

When it fails: the treaty tie-breaker

If you exceed 182 days in a year, or the green card process has started, and you meet the substantial presence test, you are a US resident under US law. Article IV of the treaty can still assign you to Canada (permanent home, centre of vital interests, habitual abode), but claiming it requires filing a Form 1040-NR with a Form 8833 treaty disclosure, and a treaty non-resident is still subject to some US reporting.

Worked example

A Toronto couple spends 130 days in Naples each winter and has done so for four years. Their daughter, a US citizen, is considering sponsoring them.

• Substantial presence. 130 + 43 + 22 = 195 days in the current year. Test met.
• Closer connection. Fewer than 183 current-year days; Toronto tax home; Ontario licences, OHIP, family, church, and voting. Exception available.
• Form 8840. Filed by June 15 each year.
• Sponsorship. The day the daughter files the I-130, the exception is unavailable. From that year, the couple would be US residents under the substantial presence test unless the treaty tie-breaker keeps them Canadian, and they would file a 1040-NR with Form 8833 rather than a Form 8840.

Official sources

"You must file Form 8840, Closer Connection Exception Statement for Aliens, to claim the Closer Connection Exception. [...] Were present in the United States less than 183 days during the year [...] Maintained a tax home in that foreign country during the entire year [...] Had a closer connection during the year to one foreign country." — Internal Revenue Service, Closer Connection Exception to the Substantial Presence Test, https://www.irs.gov/individuals/international-taxpayers/closer-connection-exception-to-the-substantial-presence-test

"You will be considered a United States resident for tax purposes if you meet the substantial presence test for the calendar year. To meet this test, you must be physically present in the United States (U.S.) on at least: 31 days during the current year, and 183 days during the 3-year period that includes the current year and the 2 years immediately before that." — Internal Revenue Service, Substantial Presence Test, https://www.irs.gov/individuals/international-taxpayers/substantial-presence-test

Practitioner note

Form 8840 is the cheapest filing on a snowbird's file and the most often skipped. A couple who met the substantial presence test three winters ago and never filed it has three years of arguable US residency, three years of unfiled FBARs, and a TFSA the IRS considers taxable. We file it every year, and we watch the day count and the green card question before either becomes a problem.

See also: Planning a move? See the Canada-to-Florida guide and browse every corridor by city, province, and state.

Next step

Fairlight prepares the annual day count, Form 8840, and the treaty tie-breaker analysis when the exception is unavailable. See cross-border pricing or book a call.