Optimize your tax refund

Expecting a tax refund? Here are three ways to make the most of that money.

  1. Pay down high-interest debt. If you were in a store and saw a $500 television marked down to $250, you’d think it was Boxing Day. Paying off your debts is like Black Friday for your finances. In the 40% tax bracket, you have to earn $1.67 to pay off a $1 debt. Factor in the interest charges, and paying down high-interest debt (credit cards and consumer loans) can be a very valuable use of your money.
  1. Put it in your RRSP. Provided you have contribution room available, ploughing your tax refund into your Registered Retirement Savings Plan (RRSP) will generate a tax deduction for your next return. Alternatively, if you withdrew money from your RRSP under the Home Buyers’ Plan in 2015 or a prior year, your contribution can go towards your repayment.
  1. Contribute to an RESP. Directing your refund to a Registered Education Savings Plan (RESP) not only helps provide for a child’s post-secondary education but can also generate additional funds from the federal government (the Canada Education Savings Grant) as well as provincial grants if you live in Quebec (Quebec Education Savings Incentive), Saskatchewan (Saskatchewan Advantage Grant for Education Savings), or BC (BC Training and Education Savings Grant).