After you File, Income & Investments, Refunds, Savings & Investments, What To Know After You File

10 Smart Ways to Spend Your Tax Refund

You filed your personal income tax return on time which was accepted by the Canada Revenue Agency (CRA) and now you have received notification of your refund.  There is so much to celebrate!  If you are signed up for Direct Deposit, your refund might be in your bank account when you receive that notification.  If you have not signed up for direct deposit you likely received your confirmation in the form of a Notice of Assessment (NOA) along with your refund cheque.

If you are submitting your return on, or near, April 30th, you can expect to see your refund within 8-weeks if you mailed it, or 2-weeks if you filed it electronically.


While it may be tempting to go splurge on yourself, there are definitely better ways you can use your tax refund.  Canadians are generally very responsible when it comes to spending that extra money.  In fact, almost 36% plan to use their refund to pay down or pay off an outstanding debt.  32% of Canadians intend on keeping the refunded money as savings, for a rainy day, and 16% will spend a portion of the refund and say that they plan on investing the rest.

The other 16%?  They’re spending it!

Whatever way you choose to go about it, you should always try to make the most out of our tax refund – use it where it will give you the most benefit.

We have put together a list of the 10 Best Ways To Spend Your Tax Refund:

1. Learn a New Skill

We have all been told of the benefits attributed to continuous learning, such as, keeping your mind sharp as you get older, becoming smarter, and learning new things.  Learning never stops, so while reading and doing puzzles are great ways to keep the brain moving, so too is taking courses (short-term, long-term, degree or diploma).

Not only does learning aid personal development which can lead to bigger and better opportunities, but it teaches you new skills and can make you better at whatever you choose to do.

Using some or all of your tax refund to sign up for a program or class, is a wonderful option which has short-term and long-term benefits.

There is a wealth of options out there, from traditional in-class short term courses to a mind-boggling range of online classes you can attend and learn more about practically any subject matter out there, plus. with the changes made to the tuition credit, you may even get money back next year for improving your skills!

2. Pay Down a High Interest Debt

If you are carrying any debt, there is a chance that you are paying interest on it too.  Credit Cards, for example, have interest rates around 20% if you are carrying a balance on your credit card.  Second mortgages can have interest rates in the 7, 8 or 9% range, while 3rd mortgages can be upwards of 15-19%.

In these cases, using your tax refund to pay-down or pay-off your debt or loan makes far greater sense than anything that you could do with your refund.  Even if the interest on your debt is lower, it might make sense to pay down the debt, because that lessens the amount you will have to pay, and reduces the amount of interest that you will end up paying.

Keep in mind, that if you have any debts to the CRA, or if you have any outstanding filings, you are not going to get your tax refund.  The CRA will keep that to pay off debts and hold until the missing paperwork is filed.

3. Invest It

If you have no debts to pay off, and you want to get a jump start on next tax season, then it might make sense to look at investing that tax refund into something tax-free / tax -deferred, such as an Registered Retirement Savings Plan (RRSP), Registered Education Savings Plan (RESP), Tax-Free Savings Account (TFSA), or maybe into the stock market.

Putting money in your RRSP provides a future tax benefit, and those funds are not able to be touched until retirement (unless you need to take it out for buying a home, or taking courses).

4. Take a Vacation

After suggesting that you save, or invest or spend wisely, how does vacation come into this?  Well, studies have shown that travelling can prove to be an investment in yourself.  Travel lowers stress levels, can boost your immune system, improve brain health, keep you fit and can also potentially increase your life expectancy.  Plus, if you are self-employed, you need some time away to recharge your batteries, so that makes travel a very important expense being spent on you and your well-being.

5. Start or Increase an Emergency Fund

Many Canadians do not have adequate savings that they can access in times of sudden financial needs. Without an emergency fund, you’re left vulnerable in the event of a job loss, medical emergency, major repairs, or other surprises. Use your tax refund to start or add to an emergency fund, so you’ll have peace of mind should anything unexpected happen.

6. Make Home Improvements

Renovations aside, there are several ways to improve your home that will actually pay off in the long run. Replace loose windows and doors, add insulation, or switch to energy efficient appliances to save on your bills. New fixtures can also yield more of a return and increase the appeal of your property if you decide to sell it.

7. Donate to Charitable Causes

You might have put off your donations earlier if you were living on a budget, but your tax refund gives you a chance to give back. Each donation can make a huge societal impact, and even though the returns aren’t as apparent or immediate, giving to charity benefits the entire society, and is also tax deductible for your next return.

8. Launch a New Business

You don’t need millions to launch a business, nor do you have to quit your job to do it. Many successful businesses started off on a shoe-string budget, fueled by passion and desire to get the idea out in the market. Use your tax refund to buy inventory, set up a website, take a business course, or pay for advertising services you’re already good at. It’s never too late to turn your hobby into an enterprise.

9. Get Something You Need

If you’ve been holding off on a major expense because of tight budgets, a tax refund is the perfect method to cover the costs of it now. Use the extra cash to pay for auto repairs, dental work, essential purchases or anything you’ve been avoiding because of the bill. If you really need it, this is the perfect time and way to pay for it.

10. Get Something You Want

You’ve earned it, haven’t you? You saved up all year, diligently stuck to your monthly budget, and avoided all the tempting sales – this is your chance to splurge and enjoy. Don’t feel guilty about indulging in a little bit of retail therapy, but don’t get carried away either. A nominal refund is no excuse for a massive shopping spree.