Breaking down the stats

Even though more than half of Canadians aren’t sure how much they’ll be getting back, the average expected refund is about $1,757.90. Ontario residents are expecting the largest refund of $2,138.60, while those in Quebec only expect an average of $1,382.30 back.

Overall, men are expecting a higher tax refund than women, at $2,015.20 vs. $1,444.50. Despite this disparity, women say they’re more likely to save their tax refund (21% vs. 14%).

Unfortunately, 31% of all respondents said they won’t be expecting a tax refund this year. Some people may be surprised to learn that 35% of Canadians aged 55 and above won’t get a refund. Many people who are retired have limited tax deductions, so owing taxes is not a surprise.

More from MoneyWise

That said, 25% of those surveyed aged 18 to 34 also aren’t expecting a refund. That could be due to the fact that they haven’t been able to make Registered Retirement Savings Plan (RRSP) contributions, due to major expenses such as buying a home or paying for a wedding.

For those that are expecting a return, no one would blame you if you decided to spend it. However, if you’re looking to maximize your tax refund, here are some things you could do with that money.

Good credit is important for your financial health, and Borrowell can help you take a turn for the better. Sign up for Borrowell to get your credit score and credit report for free!

Sign up

Use it for day-to-day expenses

With inflation at an all-time high, a tax refund can be a welcome break as it can help you with your expenses. The only issue is that this is a one-time deal. Once you’ve spent your refund, you’re still going to have to deal with rising prices.

Try to make your refund stretch by modifying your spending habits. Simple things such as driving less, changing where you buy groceries, or even price-matching can go a long way.

Pay down debt

If you have any high-interest debt such as an outstanding credit card balance or auto loan, that’s where you want to focus your attention. The return you’ll get will be worth it. Most credit cards charge an interest rate of at least 20%, so by paying that balance down you’re getting an immediate 20% return. It’s unlikely you’ll be able to do anything better with your money.

Get a $50 bonus when you open and fund your first Wealthsimple Invest account* (min. $500 initial deposit). Trade and Cash accounts are not eligible. Sign up now to take advantage of this special offer.

Get started

Build an emergency fund

If you haven’t started an emergency fund, or you’d like to top it up, your tax refund can help. Generally, you want your emergency fund to be about three months' worth of expenses. This way, if an emergency comes up such as a job loss, unforeseen repairs, or medical expenses, you’ll have some funds available to dip into without having to go into debt.

Invest it

For those looking to turbocharge their savings, they could reinvest their tax refund. If you put that money into your Tax-Free Savings Account (TFSA), any interest or capital gains earned will be tax-free when you eventually withdraw the money.

Alternatively, you could invest the money in your RRSP. By doing this, you could be setting yourself up for potentially another tax refund when you file your taxes next year.

Spend it

For those who don’t have any debt and already have a high savings rate, consider spending your tax refund. That’s right, take a vacation, buy some new tools, or treat the extended family to a nice meal. Life isn’t about saving every dollar possible. There’s no point in working hard if you can’t enjoy yourself from time to time.

Yes, it makes more financial sense to save and invest that money, but let’s be real, spending money is fun.

Do nothing

Just because you received your tax refund, it doesn’t mean you need to do something with it right away. It might make sense to just do nothing with it for now until you figure out what’s the best use for your money.

While you weigh your options you can move your deposit to a high-interest savings account. You won’t get rich from it, but at least you’ll earn some interest for the time being.

You're 5 minutes away from the best mortgage

Searching for your perfect mortgage shouldn’t be hard.

Homewise is an online brokerage that will negotiate on your behalf with more than 30 big banks and other lenders, completely free, and it only takes five minutes to apply.

If you're in the market for a new mortgage, or if you're looking to refinance before interest rates rise again, go to Homewise now and answer a few simple questions to get started.

About the Author

Barry Choi

Barry Choi

MoneyWise.ca Contributor

Barry Choi is a Toronto-based personal finance and travel expert who makes frequent media appearances. When he's not educating people on how to be smarter with money, he's earning and burning miles and points for luxury travel.

What to Read Next

Disclaimer

The content provided on MoneyWise is information to help users become financially literate. It is neither tax nor legal advice, is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. Tax, investment and all other decisions should be made, as appropriate, only with guidance from a qualified professional. We make no representation or warranty of any kind, either express or implied, with respect to the data provided, the timeliness thereof, the results to be obtained by the use thereof or any other matter.