As of June 3, the Canada Revenue Agency (CRA) has issued over $38 million in refunds to Canadians this tax season, with an average refund amount of $2,184 per taxpayer. Tax Advisor Accountant from Business 360 CPA in Burnaby suggests that clients consider the following options for their refunds.
Boost the emergency funds
Inflation and high costs are reducing people’s financial flexibility, making it crucial to have savings. The Bank of Canada recently lowered interest rates, but debt remains expensive. A Tax-Free Savings Account (TFSA) is a recommended place for an emergency fund. High-Interest Savings Accounts (HISA) offer a risk-free way to hold cash. HISA funds have been benefiting from high interest rates, paying out around 4 to 5 percent over the past two years.
Pay Your Debt
When clients have debt, it is generally best to use their tax return to pay it off. The average credit card balance for Canadians is $4,265, with interest rates ranging from 20 to 25 percent. Paying off debt quickly is important to avoid compounding interest. Paying down a mortgage can be equivalent to getting a guaranteed rate of return in a TFSA. If a client can generate a better return in a TFSA than their mortgage rate, it may be wise to invest in the TFSA. Clients with higher mortgage rates will benefit more from paying it down.
Make use of the new FHSA
The new tax-free first home savings account (FHSA) is now available for Canadians looking to enter the housing market. Clients can contribute up to $8,000 per year to a lifetime maximum of $40,000. More than 300,000 Canadians have already opened FHSA accounts since they were introduced on April 1, 2023. FHSA is a smart choice for those aiming for homeownership. Contributions are tax-deductible, and withdrawals for home purchases are tax-free.
Top up your RRSP
Contributing to an RRSP can provide a tax deduction and is a good place to invest money from a tax return. It is important to ensure that the fund is diversified and that the investment is intended for the long term. All-equity portfolios can offer higher annual returns, but it is recommended to choose funds with low management fees to maximize returns. High management fees can significantly impact your overall returns.
Tax refunds are rolling in and make the best use of it following the tips above from your local tax advisor accountant in Burnaby. However, to reach at the stage of maximizing the tax refunds you need to work with an experienced account. Choose Business 360.CPA in Burnaby to handle all accounts related matters and let you achieve the monetary success you deserve to grow yourself in your business and your personal life.
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By partnering with Business 360 CPA – reliable and Knowledgeable accountant in Burnaby you can proactively plan and make informed financial decisions to maximize your returns in the future. Our goal is simple: to save you time and help you thrive personally or professionally.
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