Most people know that April 30 was the tax filing deadline for individual taxpayers. But the big question, in terms of maximizing all your benefits is this: What are you going to do with your tax refund? Will you spend it or invest it?
Here are six tax efficient ideas for building wealth with your tax refund:
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Pay off expensive, non-deductible debt, like credit card balances. (Then vow to budget and live within your means, saving first, before spending.)
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Save within a TFSA—that’s the new Tax Free Savings Account. It’s a great place to park money and earn tax free investment income. Remember to file your return to build TFSA contribution room.
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If you have taxable income, invest in an RRSP. You will reap immediate tax savings in the double-digits, money you can then use for a TFSA contribution.
- If you have children, invest the money in an RESP—a Registered Education Savings Plan, and benefit from the Canada Education Savings Grant.
- If you have a disabled dependant, invest the money in an RDSP—a Registered Disability Savings Plan, and benefit from the grant and bond structures available here.
- Invest the money outside registered plans in your non-registered accounts, with a view to earning tax efficient income like dividends and capital gains.
However, if you must consume frivolously, it will stimulate the economy! But, think about this as you do it: the trick to mastering your money is to take control of the first dollar you earn, hold on to it the longest through wise investment choices, and then, pass along the most to yourself in your retirement and your heirs at death.
Evelyn Jacks is President of The Knowledge Bureau and author of Master Your Taxes, Make Sure It’s Deductible and Essential Tax Facts. Readers may sign up for a free subscription to Knowledge Bureau Report at www.knowledgebureau.com.
For more ideas, JoeTaxpayer wrote How Are You Going to Spend that Tax Refund? on The TurboTax Blog.
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I always do my taxes as soon as I get all the necessary paperwork; it’s my money and I want it now! I sit down and play with the numbers until I use up all my refund in RRSPs and then ‘borrow’ that amount from my LOC and invest it. My refund is usually in my account within a week – another plus to doing my taxes so early
– and I pay myself off with minimal interest.
My RRSPs get a great boost because I just can’t seem to max them out and I don’t miss the money because I never really had it. It’s a win/win situation
I invested about 3/4 of my refund, and put the other 1/4 into savings. It’s a rare thing for me to get a refund, so I was happy to take advantage of the opportunity.
.-= Jackie´s last blog ..Do It Now =-.