For many Canadian expats in Houston, few questions trigger more late-night Google searches than “Where am I really a tax resident?” U.S. immigration status, counting days on a calendar app, and filing piles of forms only scratch the surface. Ultimately, what decides whether Ottawa or Washington gets first crack at taxing your worldwide income is the residency article (Article IV) of the Canada-U.S. Tax Convention. That article contains four sequential “tie-breaker” tests—permanent home, centre of vital interests, habitual abode, and, finally, citizenship.
This in-depth guide walks you through each test, shows real-world documents the IRS and CRA actually rely on, and explains how to position your facts—ideally with the help of a Canadian financial advisor Houston who lives these rules daily—to defend your residency when audits or treaty disclosures arise. Think of it as the definitive roadmap for Canada-US cross-border financial planning Houston families who straddle two tax systems at once.
Table of Contents
Why the Tie-Breaker Tests Exist
Both Canada and the U.S. tax residents on worldwide income. Canada’s “sojourner” rules and the U.S. substantial-presence formula can easily make the same individual resident in both countries for the same year. To prevent double taxation, Article IV(2) of the treaty applies a hierarchy of tests to assign you to just one country for treaty purposes.
A treaty residency determination affects:
- Which country gets first right to tax employment, business, capital-gains, rental, and pension income
- Eligibility for foreign tax credits, Social Security totalization, TFSA/RESP reporting, and the lifetime capital-gains exemption
- Whether you file Form 8833 in the U.S. or a T1 return plus Schedule T1 in Canada stating treaty residency
That is why documenting your facts—before you’re asked—is critical.
The Four Treaty Tie-Breaker Tests in Order
Permanent Home Test
Definition. Under Article IV(2)(a), you are resident where you maintain a “permanent home available to you.” Home means any dwelling—owned, rented, or even provided by an employer—offering a degree of permanence. Occasional hotel stays or short-term Airbnb rentals do not count. If you keep a permanent home only in one country, the analysis ends there.
Practical evidence to gather
| Evidence | Why it helps |
| Long-term lease, deed, or mortgage | Shows legal right to occupy indefinitely |
| Utility, property-tax, HOA invoices | Demonstrate ongoing expenses tied to that home |
| Insurance policies listing the address | Confirms intent to protect personal property there |
| Driver’s license & voter registry address | Signals primary living location |
| Photographic inventory of furnishings | Proves home is actually equipped for living |
Tip: Keep digital copies in a secure vault. Adjudicators want contemporaneous records, not reconstructions.
Grey Areas in the Permanent Home Test
“Permanent” does not mean forever. The OECD commentary, which both CRA and IRS consult, says the term covers any dwelling that you arrange “with the intent to keep at your disposal for a continuous period.” Moving to Houston on a two-year contract and signing a corporate lease therefore satisfies the test, even if you ultimately terminate early. Conversely, keeping your childhood bedroom in your parents’ Calgary bungalow is not a permanent home if you have no legal right to use it independently.
Where expats trip up most is failing to update mailing addresses. U.S. banks still sending statements to an Alberta P.O. box undercut a Houston treaty residency claim. Aligning all billing addresses with your asserted treaty home is the low-hanging fruit examiners spot instantly.
Centre of Vital Interests Test
If you have permanent homes in both countries, the treaty asks where your “personal and economic relations” are closer. Think of it as an X-ray of your life: where your spouse and kids live, where you work, bank, worship, volunteer, sit on boards, hold club memberships, manage investments, and even where the family pet is registered.
Evidence Checklist
- Family school enrolment letters, tuition statements, report cards
- Spouse’s employment contract and work-visa tied to Houston employer
- Bank, investment, and credit-card statements showing day-to-day transactions
- Membership invoices for churches, fitness clubs, and professional associations
- Pictures or veterinary records proving Fido actually resides with you
Weighting Your Centre of Vital Interests
Auditors rarely disclose exact scoring rubrics, but practitioners observe that family location and primary employment carry the most weight, followed by asset management and social organizations. One practical method is to assign each tie a numerical score—say 5 points for family, 4 for employment, 3 for property investments, and so on—and tally per country. While not officially recognized, presenting this matrix in a cover letter can make your submission digestible.
Remember that economic ties include passive income streams. If your portfolio is managed out of Toronto, yet all securities are U.S. ETFs held at a Houston brokerage, the economic needle may point south. Highlight not only asset location but also jurisdiction of advisors, custody, and reporting currency.
Habitual Abode Test
Failing to decide on vital interests, Article IV(2)(c) looks to where you “habitually” live. Count nights spent in each country over a representative multi-year period. Unlike the U.S. substantial-presence test (which ignores prior years beyond two), the treaty’s habitual-abode test may stretch as far back as examiners deem relevant. Travel logs, airline itineraries, I-94 histories, and smartphone location data become your proof.
Practical tip: Maintain a calendar that records every border crossing, including those quick weekend flights to Calgary for hockey tournaments. Consistency between that calendar and your Form 8840 or NR73 submissions is vital.
Reconciling Habitual Abode with COVID-Era Travel Bans
The treaty does not grant special grace for pandemic-related immobility. If travel restrictions stranded you in Canada for eight months of 2020, those days count. However, Revenue Procedure 2020-20 allowed certain individuals to exclude up to 60 days for U.S. substantial-presence, but CRA had no similar relief. This mismatch means some Canadians unintentionally became Canadian residents again. Document the governmental travel bans, flight cancellations, and medical advisories that forced your presence. A well-organized file can persuade auditors to interpret your intent fairly.
Citizenship Test
Still tied? The treaty assigns residency to the country of which you are a citizen. Dual citizens can’t break the tie here, so the Competent Authorities of both jurisdictions must negotiate. But in practice, hardly any cases reach this stage because earlier tests almost always decide.
Dual Citizenship: The Competent-Authority Playbook
If both you and your spouse hold passports from both countries, and earlier tests remain inconclusive, you must request Competent Authority assistance. Expect to provide a detailed chronology of residence facts for up to five prior years, copies of all tax returns filed in both countries, and third-party affidavits corroborating your narrative. The process is slow—often 18 to 30 months—so most taxpayers work to settle on earlier tests.
Building Your “Residency Dossier”
- Start with a day-count baseline. Export your I-94 travel history, download CBP’s Arrival/Departure app data, and cross-check with credit-card receipts.
- Catalogue homes. Photograph every dwelling you control, save copies of leases, and note start/stop dates.
- Map your family footprint. List where each immediate family member spends most nights; gather school and medical records.
- Trace economic ties. Print brokerage addresses, payroll locations, rental agreements, and Texas property-tax bills.
- Log social/community roots. Keep receipts for Houston rodeo season tickets, church tithe statements, and Rotary Club dues.
- Update annually. Residency is tested every tax year. Lock in evidence before memories fade.
Working with a Canadian financial advisor Houston familiar with CRA file-review practices can streamline this dossier, ensuring gaps are closed before filing deadlines.
Common Evidence Mistakes
- Misaligned lease dates
- Inconsistent social-media geotags
- Overlooked insurance renewals
- Dormant bank accounts
Leveraging Technology
Cross-border advisors now deploy secure apps that sync with airline APIs, credit-card geotags, and phone GPS to build immutable day-count logs. Some even timestamp the data on a private blockchain so it cannot be altered post-audit.
Case Studies
Emma & Daniel—From Calgary to the Energy Corridor
Year 1: Only permanent home in Houston; treaty residency U.S.
Year 2: Homes in both countries; centre of vital interests flips to Canada after children return to Calgary school.
Year 3: Family sells Calgary house, Daniel sells practice; residency flips back to U.S.
Nora—The Remote Tech Nomad
Nora, a software engineer, rotates between Houston and Vancouver under TN status:
2022: Permanent home only in Houston, treaty residency U.S.
2023: Buys Vancouver condo, keeps Houston sublease; centre of vital interests shifts to Canada despite 140 U.S. days.
Planning Opportunities Once Residency Is Settled
| Strategy | Best if Treaty Resident of | Why |
| Roth conversions | U.S. | Lock in tax-free growth before moving north |
| RRSP top-ups | Canada | Immediate Canadian deduction, U.S. deferral |
| Capital-gains timing on real estate | Either | Coordinate Section 121 (U.S.) with Canadian principal-residence rules |
| Estate freezes & gifting | Canada | Avoid U.S. estate tax on global assets |
The State-Tax Wildcard
Texas imposes no income tax, but a six-month project in California can create state residency even if the treaty says Canadian resident. Keep state factors—driver’s license, voter registration, domicile affidavits—in sync with your treaty position.
Forms & Filings at a Glance
| Form | Filed With | Purpose |
| 8833 | IRS | Treaty-based return position |
| 8840 | IRS | Closer-connection statement |
| NR73 / NR74 | CRA | Residency determinations |
| T1135 | CRA | Foreign-asset reporting |
| 8854 | IRS | Exit-tax statement (if expatriating) |
Digital Nomads & Short-Term Leases
With Airbnb and 12-month visas proliferating, many professionals rotate between Houston and Toronto on month-to-month leases. Remember: the treaty’s permanent-home test values availability over ownership length. An open-ended Airbnb reservation that renews automatically can satisfy “available” if demonstrably intended as a home base.
Charitable Giving as a Tie-Breaker Indicator
Where you claim charitable deductions is signal. Donations to U.S. 501(c)(3)s suggest U.S. residency, while CRA-registered charities hint Canadian ties. Keep receipts from both, but be prepared to explain any mismatch (e.g., supporting a U.S. alma mater despite Canadian residence).
Social-Security vs. CPP Contributions
Contributions often track primary employment. Filing a Certificate of Coverage under the Totalization Agreement can prevent double contributions and clarify where your economic allegiance lies.
Estate & Succession After Residency Flips
Changing residency re-orders your estate plan. Canadian capital-gains tax at death contrasts with U.S. stepped-up basis but possible estate tax. Draft mirror wills and powers of attorney in both jurisdictions, and consider joint tenancy, cross-border trusts, or electing Canadian trusts under IRC Section 645 to harmonize outcomes.
One-Page Residency Checklist
- Do I have a single permanent home?
- If not, where are my closest personal & economic ties?
- Failing that, where do I sleep most nights?
- Am I a citizen solely of one country?
- Do my documents tell a consistent story?
- Have I filed necessary treaty-disclosure forms?
- Did I coordinate with my Canada-US cross-border financial planning Houston team before year-end?
Disclaimer
This article provides general educational information and is not tax or legal advice. Every situation is unique; consult qualified professionals licensed in both Canada and the United States before acting.