Cardinal Point Wealth Management Brings Awareness to Cross-Border Tax Challenges for Canada-U.S. Digital Nomads

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Toronto, ON - October 13, 2025 - Cardinal Point Wealth Management is raising awareness of the growing tax complexities facing digital nomads who live and work across the Canada-U.S. border. With remote work now an established reality in the global workforce, an estimated 40 million people worldwide identify as digital nomads in 2025, including more than 18 million Americans. For Canadians and Americans who split their time across the border, the lifestyle promises flexibility but also presents significant tax considerations.

A Shifting Work Landscape

The COVID-19 pandemic accelerated the adoption of remote work, enabling professionals to live and work from virtually anywhere. For many Canadians and Americans, this has meant moving across the border while maintaining employment or freelance contracts. However, freedom of location introduces new questions around tax residency, reporting obligations, and the potential for double taxation.

Tax residency is not determined by citizenship alone, but by where an individual maintains a home, family, business ties, or spends a significant amount of time. Misunderstanding these rules can lead to unexpected tax bills, audits, or missed deductions. As digital nomads increasingly blur the lines between countries, proactive planning is essential.

Contrasting Tax Residency Rules

The United States and Canada take different approaches to determining residency for tax purposes.

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United States: The Internal Revenue Service (IRS) applies the Substantial Presence Test, based primarily on the number of days spent in the U.S. If an individual is present for 183 or more days in a given year-or meets a weighted three-year threshold-they are considered a U.S. tax resident. U.S. citizens, regardless of where they live, are taxed on worldwide income and must file annually.

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Canada: The Canada Revenue Agency (CRA) uses a more holistic approach, focusing on an individual's "center of vital interests" (COVI). This includes primary residence, family ties, financial accounts, employment, and social connections. Spending 183 days or more in Canada typically triggers residency but is not definitive. Stronger ties can establish residency even with fewer days in the country.

These differing systems mean that a Canadian living in the U.S. [https://cardinalpointwealth.com/canadians-living-in-the-u-s/] temporarily-or an American working remotely from Canada-could be deemed a resident in both countries simultaneously.

Treaty Protections and Tie-Breaker Rules

To prevent double taxation, the Canada-U.S. Tax Treaty [https://cardinalpointwealth.com/?s=tax+treaty] provides tie-breaker rules. These include evaluating where a person maintains a permanent home, the location of their strongest personal and economic ties, their habitual place of residence, and, in some cases, nationality. If uncertainty remains, tax authorities may resolve the matter through mutual agreement.

For example, a Canadian digital nomad working for a U.S.-based company but maintaining a permanent home and family in Vancouver would likely be classified as a Canadian resident. Such distinctions are critical in determining where income is taxed and what relief mechanisms are available.

Relief Mechanisms for Digital Nomads

Both Canada and the U.S. provide options to reduce tax burdens for cross-border workers. U.S. citizens may qualify for the Foreign Earned Income Exclusion, which allows up to $130,000 of foreign-earned income to be excluded if residency or presence tests are met. In addition, foreign tax credits in both countries reduce the risk of double taxation, and agreements between the U.S. Social Security Administration and the Canada Pension Plan provide relief in cases of temporary relocation.

State Tax Considerations and Employer Risks

For U.S. digital nomads, state-level tax rules add another layer of complexity. States such as California and New York often place the burden of proof on individuals to demonstrate they are no longer residents, even if they have moved abroad. Meanwhile, employers face risks if a remote worker's presence in another country is deemed to create a permanent establishment, potentially triggering corporate tax obligations.

Practical Strategies for Remote Workers

Experts recommend that digital nomads take steps to clarify and document their tax residency status, including:

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Maintaining ties to one primary country to avoid dual residency.

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Keeping meticulous records of travel days and income.

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Reviewing their situation annually with a qualified cross-border tax advisor.

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Considering long-term implications such as retirement and estate planning.

Conclusion

While the digital nomad lifestyle offers unparalleled flexibility, it also requires careful navigation of tax residency rules between Canada and the U.S. By understanding the substantial presence and vital interest tests, applying treaty protections, and leveraging relief mechanisms, cross-border workers can reduce risks and achieve greater financial certainty.

About Cardinal Point Wealth Management

Cardinal Point Wealth Management specializes in providing comprehensive cross-border financial planning [https://cardinalpointwealth.com/cross-border-financial-planning/] for individuals with connections to both Canada and the United States. With expertise in tax, retirement, investment, and estate planning, the firm helps clients navigate the complexities of living, working, and investing across the border.

Disclaimer: This press release may contain forward-looking statements. Forward-looking statements describe future expectations, plans, results, or strategies (including product offerings, regulatory plans and business plans) and may change without notice. You are cautioned that such statements are subject to a multitude of risks and uncertainties that could cause future circumstances, events, or results to differ materially from those projected in the forward-looking statements, including the risks that actual results may differ materially from those projected in the forward-looking statements.
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Company Name: Cardinal Point Wealth Management, ULC
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