Three Thoughts on Tax Returns

Scott McEachern |

Tax season is coming up and I’ve already witnessed quite a few Facebook posts on the plans for some individual’s incoming return. A new guitar, a new tattoo, a new this, and a new that. A lot of people view their return as free money. The reality is that it’s actually money you over-paid to the government that you didn’t have to. The government kept it for a year and is now returning it to you interest-free. That being said, there are a few things I would personally do before buying something new and shiny with your return.

#1 – Ask your employer to lower the amount of tax that is withdrawn from your paycheque.

The result of this quick step means at the end of the week, you’ll have more money in your pocket! That’s a win, right? You can take that money, put it into a savings account, earn interest and have even more money. Another win, right? It just makes sense. Who this doesn’t work for are the people that aren’t disciplined enough to start up a savings account and set their money aside on their own. Just a note -if less tax is withdrawn, you'll end up getting a smaller return than you may be used to, but that's a good thing.

#2 – Use your return to pay off debts.

When you think about it, you overpaid the government when you didn’t have to, meanwhile you’re being charged interest on any debts you currently have. Doesn’t that tick you off? You can combine with tip #1 above, and put that extra money towards debt too. Ever since graduating University, Stephanie and I have put every dollar of every return straight to debt. As a matter of fact, it helped us pay off our student loans much, much quicker.

#3 – Reinvest your tax return.

If you weren’t expecting a tax return, but got one anyway, you’ve essentially been saving that money (again, interest free…but still). Why not just take that money that you obviously didn’t miss enough to do tip #1 and just continue to save it? Bonus tip – if you invest that money into an RRSP, there will be tax deduction for your next tax year!


At the end of the day, your tax return is your money to do with what you please, but I certainly encourage you to look at the three options above to ensure you are making the best choice with your money.