Are you expecting to get a big, fat juicy tax refund this year from the taxman? You’re not alone. Over half (57 percent) of Canadians expect to get a refund from the Canada Revenue Agency (CRA) this year, finds a recent TD survey. Of those expecting a refund, over six in 10 (61 percent) anticipate a tax refund of up to $1,499. While it can be tempting to take your tax refund and go on a five-star vacation to Hawaii, there are better uses for it. Here are some of the best ways to make the most of your tax refund.
Consumer Debt
If you’ve borrowed money, consumer debt repayment is a good place to start. If you have any high-interest debt like credit card or payday loans, a lump sum payment and go a long way to paying it down sooner and saving yourself a boatload of interest. Likewise, if you have student debt, making lump sum payments can help you reach debt freedom that much sooner. If you have a mortgage, why not make a lump sum payment? Interest rates may be low now, but there’s no guarantee they’ll be this low forever. Take advantage of them today.
Employer Pension Plan
Do you have a retirement plan at work? Consider yourself lucky. The sad reality is many employees aren’t taking full advantage of their workplace pension plans. If your employer offers matching contributions, run, don’t walk, to human resources to join.
The two most popular types of retirement plans with matching are group RRSPs and defined contribution pension plans. When you contribute a certain amount, say $500, your employer will match it (in this example, kick in $500 of their own). That’s like a 100 percent return on investment before you’ve even picked your portfolio – it doesn’t get any better than that!
RRSP Contributions
With this year’s tax refund, why not get a head start on your RRSP contributions for next year? Contribute today and claim a refund on next year’s tax return. If you’re a first-time homebuyer, contribute to your RRSP and take advantage of the Home Buyer’s Plan to help your down payment grow even faster.
TFSA
The Tax-Free Savings Account (TFSA) was introduced all the way back in 2009. Those eligible back then have over $40,000 of contribution room. Although the TFSA is more popular than RRSPs, most Canadians have plenty of TFSA contribution room to catch up on. Make a lump sum payment for this year or catch up on previous years.
RESP
Is your son of daughter (or both) attending to post-secondary education soon? If you haven’t opened a Registered Education Savings Plan (RESP), what are you waiting for? The government gives you free money just for contributing (a 20 percent grant top-up).
These are just a few of the top ways to put your tax refund to good use. Can’t figure out what is the best choice for your family’s financial situation? Feel free to contact our office for a helping hand.
