Unimor Capital Corporation

Tag: tax refund

  • Maximizing Your Tax Return

    Maximizing Your Tax Return

    If you filed your taxes and found you’re getting a refund this year, you might be wondering how to use the money. Once you’ve determined you’ll be getting a tax refund this year, you’ve got options when it comes to using your extra cash. It can be tempting to spend the sudden windfall on a shopping spree, but if you’d rather play it safe this year, we’ve put together seven sensible — but satisfying — ways to use your tax return.

    1. Pay Down Your Debt
    If you’re carrying personal debt, you’re not alone. The average household debt hit $72,950 at the end of 2019, up 2.7% from the previous year, according to a recent consumer debt study. By using your refund to pay down your debt, not only will you lower your current balance, but you’ll also reduce the amount of interest you’ll pay on your remaining balance — and that will put more money in your pocket down the road.

    2. Open or Contribute to a Tax-Free Savings Account (TFSA)
    A TFSA is a great savings tool for both short- and long-term goals. It’s a flexible savings plan that lets Canadians who are 18 years and older save and invest tax-free, with competitive interest rates. Anything you contribute to a TFSA, as well as any income earned in the account (such as investment income and capital gains), is generally tax-free, even when it’s withdrawn.

    3. Boost Your Registered Retirement Savings Plan (RRSP)
    If you’re getting money back in the form of a tax refund, a smart way to use the money is to stash it away in your RRSP. An RRSP is one of the most effective retirement saving tools available to most Canadians. And since your money is sheltered and doesn’t get taxed until you withdraw it, your funds can grow even faster.

    Another benefit is that RRSP contributions are tax-deductible, which means they lower your annual taxable income for the next year. To find out your RRSP deduction limit, look at your latest notice of assessment or check with the Canada Revenue Agency (CRA).

    4. Spend a Little, Save More
    If you’d really like to treat yourself to something new with your tax refund, there’s a way to do it without feeling guilty. A good compromise is to buy one (reasonably priced) treat and put the rest of the money into your savings. Where you save the money is up to you. You’ve got plenty of options: a regular savings account, a Tax-Free Savings Account (TFSA), or an RRSP. Putting a good chunk of your tax return in your savings is a smart move, especially during tough financial times.

    5. Save for Your Kids’ Future
    If you have kids, you can use your tax refund to boost their education funds. The cost of university is steadily rising, and the sooner you can start saving for it, the better. A four-year degree is likely to cost more than $100,000 — making a Registered Education Savings Plan (RESP) one of the best investments you can make in your child’s future.

    6. Invest in Your Home
    We’re spending more time at home than ever, so why not use your tax refund to improve where you live? You can do this in a couple of ways. If you’re thinking of buying a new home, you can use your refund to save up for your down payment (you may even be eligible for a first-time home buyers’ tax credit). Or if you already own a home and you’re content, consider investing in renovations, whether it’s a big project like giving your bathroom a total refresh, or a smaller investment like creating an office nook to make working from home more enjoyable. It may seem like an indulgence, but by upgrading your home, you’re actually adding value to it for the future.

    Getting a tax refund can feel like an unexpected gift. To make the most of the money and bring yourself peace of mind, it’s a good idea to resist the urge to spend it all, and instead take the time to think about how you can use your refund to make the biggest impact.

  • What to Do With Your Tax Refund

    What to Do With Your Tax Refund

    Another tax season is behind you – it’s time to relax, sit back, and wait for that return. The average Canadian is entitled to a refund, according to Canada Revenue Agency, with the average refund for last year’s income tax totaling $1,580. Before you splurge, however, let’s take at a look at the benefits of saving your tax refund and putting it to better use. Here are our top tips for what to do with your tax refund:

    1. Stop treating your return like found money

    Although most Canadians are happy to receive a tax refund, there’s very little reason for celebration – you’re actually giving Canada Revenue Agency an interest-free loan. Many Canadians think of a tax refund as a bonus, even though it’s your own money to begin with. Instead of treating your tax refund like found money, it’s important to spend it prudently.

    1. Pay off any outstanding bills

    If you have outstanding bills, using your tax refund to pay them off is probably the best option for you. There’s nothing worse than the stress of being behind. Take this opportunity to get ahead of the game for once.

    1. Pay down your credit card debt

    Credit card debt can build quickly, but it’s hard to whittle down once it mounts. If you have outstanding debt on your credit cards, the responsible thing to do would be to put your tax return towards that debt. Of all the debt you have, credit card debt is most likely to have the highest interest rate running from 10% – 29%. By paying that debt down first, you’ll actually be saving money in interest later.

    1. Put some of it towards your mortgage

    You can’t beat the guaranteed rate of return of paying down your mortgage. If you have a mortgage that allows you to make additional payments without penalty (and most mortgages will allow you to make an annual lump sum payment of 5% – 25% of the mortgage value), this might be the perfect opportunity to use that to your advantage. The more you pay now, the less you pay in interest later.

    1. Invest in your future

    If you haven’t started an RRSP, maybe it’s time. Your return might not amount to much now, but over the years your investment will grow. This is a particularly good idea if you are feeling no other financial pressures at the moment. A tax return can also be the perfect way to launch an RESP for your child. Consider spending your tax refund to invest for your child’s education – a deposit to an RESP (Registered Education Savings Plan) could be eligible for 20% grant for children up to age of 18 for contributions up to $2500.

    1. Start an emergency fund

    Doesn’t it sometimes seem like bad things happen either when you’re least prepared or when you’re least able to cope? You just paid a huge vet bill and your washing machine suddenly dies. You finally paid off your credit card debt and your car breaks down. These situations happen all the time, and sometimes it feels like you’ll never get ahead. Without an emergency fund, situations like these can be stressful. Why not take this extra cash and set it aside for those little emergencies? When the time comes – and it will – you’ll be glad you did.

    1. Upgrade your job skills

    Have you recently found yourself wanting to return to school? Have you dreamt of taking courses to upgrade your skills? Will doing so help increase your salary? If you answered ‘yes’ to any of these questions, you might want to consider using your return to invest in yourself. This is an especially good idea if it will help to boost your income in the long run.

    1. Treat yourself to something nice

    Sometimes being responsible is all we do. If you’re one of those people who seem to always be doing the right thing – saving money, paying down bills, saying no when you really want to say yes – then maybe you need to do something nice for you. Buy yourself a new outfit. Go get your hair done. Take yourself out for a nice lunch. Go golfing. Spoiling yourself is sometimes the best course of action – especially if it’s something you don’t often do.

  • What You ‘Should’ Do with Your Tax Refund

    What You ‘Should’ Do with Your Tax Refund

    If you’re getting cash back this year from filing your income taxes, hold off on booking those plane tickets. There are ways to get the most ‘bang’ for your refund bucks.

    1. Contribute to a Registered Retirement Savings Plan (RRSP)

    If you spend your RRSP refund… you unknowingly end up investing less than you started with, and less than most think. If you spend your RRSP refund, you are converting dollars that have already been taxed into RRSP dollars that will be taxed again later when you withdraw the funds. Many people mistakenly think that if they put $3,000 in their RRSP and spend their refund, they’ve added $3,000 to their retirement fund. But if you’re in a 40% tax bracket and spend the $1,200 refund, you’ve only invested $1,800 of the $3,000 you started with. And if you reinvest that $1,200, you’ve already contributed $4,200.

    2. Pay Down Debt

    Attack those high-interest debts first. Credit cards and unsecured credit lines can charge interest ranging from 6 to 21% and can be a real strain on cash flow, preventing you from getting ahead. With credit cards typically charging 19 to 21% on unpaid balances, you are unlikely to find an investment that will guarantee you a higher return to justify investing rather than paying off debt.

    3. Put the Money Towards Your Mortgage

    This isn’t necessarily for everyone, but there are good reasons to consider making a lump-sum payment. Even though mortgage rates are very low, we know they will go up eventually. By putting a lump sum down on the mortgage now, the payments when you renew the mortgage may still be manageable. Using your tax return to pay down your mortgage will not only give you a guaranteed rate of return, but it will also ensure that you’re mortgage-free sooner and save you thousands in interest over the life of your mortgage.

    4. Open or Contribute to a Tax-Free Savings Account (TFSA)

    If your income is currently below where you project it to be at retirement, you may want to look at maximizing your TFSA. Similar to an RRSP, this account allows you to earn investment returns tax free. Although you receive no tax deductions, you are consequently not taxed on withdrawals. Not having any contribution room left for an RRSP is another argument for contributing toward a TFSA.

    5. Get Smart About Saving

    If you have children, keep in mind just how costly their post-secondary education is going to be. By catching up on RESP (Registered Education Savings Plan) contributions, you can receive up to a 20% matching contribution from the Canadian Government in the form of a Canadian Education Savings Grant. That’s an impressive rate of return on investment without taking any risk. Another option is to spend the funds on your own education as a means to improve your skill set and move up the ladder or transition to another career altogether.

    6. Look into Life Insurance

    It can be hard to see the benefits of this investment, but it’s worth remembering that anything can happen. Life insurance is essential, especially for young families. You need to cover your debts and protect from loss of income to ensure the well-being of surviving family members. Even though life insurance can be inexpensive, some young families have a difficult time finding the cash flow to pay for it. Using a tax refund to fund the annual premiums can be a way to not affect day-to-day living expenses but still ensure you and your family are protected in the event of premature death.