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tax matters

Are you fortunate enough to still have your mother in your life? If so, be sure to visit her this weekend if you can. And if you do, don’t forget to bring her a Mother’s Day gift. She’ll appreciate the thought – although this could depend on what it is. From experience, I don’t recommend buying her a vacuum cleaner, sump pump, drain-pipe cleaning tool or a coffee mug that says: “No matter how hard life gets, at least you don’t have ugly children.”

Here’s one more tip: Consider using your tax refund to buy that Mother’s Day gift. And if your refund is big enough, you might be able to accomplish some other things as well. Consider these top 10 ideas:

  1. Buy your mother a gift. Although my memory is a sieve when it comes to remembering birthdays, anniversaries and all manner of other important dates, I’ve learned to always remember Mother’s Day because I use my tax refund to buy Mom a gift. File your return by April 30 each year and you should have the cash available in time for Mom’s big day.
  2. Pay down your credit cards. I’m going to assume two things about your credit card interest: First, it’s likely a very high rate (perhaps 19 per cent or more), and second, it’s not likely tax-deductible (unless it’s business-related). So, paying down your credit-card debt with your tax refund is equivalent to achieving an after-tax rate of return equal to your interest rate on the card.
  3. Pay down your other debt. In my view, there is good debt and bad debt. Good debt is where you’ve borrowed at low rates of interest to buy appreciating assets (a home mortgage, for example), and it’s even better if the interest is tax-deductible. Student loans are not so bad since they give rise to a tax credit for the interest. These types of debt should be paid off last. Other types of debt, such as unsecured lines of credit or car loans, should be paid off first.
  4. Create an emergency fund. Financial planners will generally suggest having three months of spending set aside in short-term savings to help with unexpected costs. Your tax refund can help to build that emergency fund.
  5. Save for a child’s education. Contribute your tax refund to a registered education savings plan (RESP) and you’ll multiply your savings thanks to the Canada Education Savings Grant the government will pay into the RESP along with your money. That grant will be 20 per cent of your contributions, to a maximum of $500 per beneficiary per year. The grants will be a little higher if your income is below $95,259 for 2019.
  6. Contribute to a registered plan. Behind in saving for retirement? Use your refund to contribute to your registered retirement savings plan or tax-free savings account. The RRSP, of course, can offer a tax deduction for the contribution that may help to get you a larger refund next year, allowing you to do it all over again.
  7. Upgrade your education. Use your refund to broaden or deepen your knowledge, or simply enrich your life with new learning. This could improve your job prospects, equip you for more responsibility at work or allow you to earn self-employment income part-time. It’s all good.
  8. Invest in your home. Increasing the value of your home is always a good idea because selling your principal residence later can result in tax-free profits for you. So, consider investing your refund in your home. Replacing drafty windows and doors, adding insulation in the attic, or replacing appliances or lights with energy-efficient ones will not only improve the value of your home but can save utilities costs as well.
  9. Get some tax advice. The year 2018 brought big tax changes for Canadians – particularly small-business owners. The rules around splitting income with family are more restricted, passive income earned in a corporation can have new negative implications, and a number of tax credits disappeared (public transit, education, first-time donor’s credits, for example). Using your tax refund to visit a tax pro and re-evaluate your approach to saving tax could be a good idea.
  10. Donate some money. Take the time to create a strategic giving plan. Think about the areas of giving you’d like to support (health care, education, domestic poverty relief, international poverty relief, welfare of children, and others) and plan to donate today – not just at year-end. You’ll save up to about 50 cents in taxes for every dollar you give away (although this varies by province and income level).

Tim Cestnick, FCPA, FCA, CPA(IL), CFP, TEP, is an author, and co-founder and CEO of Our Family Office Inc. He can be reached at

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