Many Canadians are expected to receive a tax refund this year. With that extra money, it may be very tempting to increase discretionary spending. However, here are some helpful tips on what to do with your tax refund.
Top 10 Ways to Use Your Tax Refund
- Build your nest egg: Whether it's $10 or $100 or $1,000, use your refund to contribute to your TFSA and save your tax refund tax free. After the 2015 Budget, you can now contribute $10,000 to your TFSA each year.
- Contribute to your RSP: RSP’s grow on a tax deferred basis. The income inside the Rsp is not taxed until money is withdrawn. RSP contributions can be claimed as a tax deduction on your tax return.
- Reduce or eliminate debt: Use that extra money to help pay off debt. There is good debt and bad debt. Good debt is tax deductible debt at low rates. Bad debt is non-deductible debt at high rates. So, consider paying off the high interest debt like credit cards.
- Save for an emergency: Save for that rainy day by upping your emergency fund – or creating one. An emergency fund should be sufficient to cover about six months of living expenses.
- Invest in your children: Contribute to your child's RESP – the Canada Education Savings Grant will give you 20 per cent on the first $2,500 you save in your child's RESP each year.
- Invest in yourself: Enroll in training or a professional development course that can help boost your career.
- Invest in your health: Get that gym membership to improve your overall fitness, purchase a wellness tracker to set and achieve personal fitness goals, or spend a little bit more at the grocery store purchasing healthier food options.
- Consider paying down the mortgage: Put money towards mortgage payments or a down payment on a home. However, mortgage rates are very low, it may be better to invest the refund and make a better return on an investment.
- Consider your risk management: Do you have proper income protection? Coverages like critical illness, disability income protection and life insurance should be reviewed to ensure the necessary income protection is in place.
- Make some upgrades: Switching to energy-efficient appliances can help save money on utility bills. Perhaps, put in a new fireplace or that new walkway that you have been wanting.
Use your tax refund wisely, have some fun and get a good return on your investment.
When you receive your tax refund, consider your options wisely. At Tax Doctors Canada, we can help. The professional tax accountants at Tax Doctors Canada have extensive experience in handling Canadian and International tax accounting matters and in collaboration with our associate company, GTA Wealth Management Inc, also provides exceptional financial and risk management planning. Tax Doctors Canada offers a stress free Initial No Obligation Phone Consultation with one of our professionally certified tax accountants. We Welcome Your Business!
Tax Doctors Canada has 3 office locations (by appointment only) in Toronto, Markham and Mississauga to serve you. You can also have one of our certified tax accountants assist you with your personal tax return requirements remotely from the comfort of your home utilizing Tax Doctors Canada's secure document transfer portal. We accept clients from Canada and worldwide.
