Tax Refund - Will You Invest It?
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Most people know that April 30 is the tax filing deadline for individual taxpayers, and by now you should have received all of your slips, including T3's and T5's, to send to your tax preparer in order to finish the task. 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:
- Pay off expensive, non-deductible debt, like credit card balances. (Then vow to budget and live within your means, saving first, before spending.)
- 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.
- 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.
Reproduced with the permission of The Knowledge Bureau