Once you receive your tax refund, you can save it, invest it, or spend it. Whatever you choose, it’s wise to make a tax-advantaged, savvy decision about how to allocate your funds.
Canadians who file their tax returns electronically can typically expect their refunds within two weeks, while those who submit through the mail can expect them within eight weeks. Direct deposit is the fastest way to receive your tax refund.
Here are five ways to use your tax refund to get ahead and enjoy the season.
Key Takeaways
- You can expect to receive your refund within two weeks if you filed your tax return online and eight weeks if you filed by mail.
- It’s wise to use your tax refund to pay down debt or add it to your savings.
- Investing your tax refund in stocks, ETFs, GICs, or mutual funds can increase its value over time.
- Another idea is to celebrate your hard work and smart savings by using your refund to treat yourself.
Before you act, consider your unique financial situation
Each person's financial situation is unique. Before you decide what to do with your refund, take a moment to review your needs and opportunities – and make a budget.
Making a personalized budget is the first step in mastering personal finance.
For instance:
- Do you have money saved in case you get laid off?
- Have you maxed out your retirement account this year?
- Are you a homeowner with a leaky washing machine?
- Are you a student with credit card debt?
Still not sure? Think about your biggest source of financial stress – put your tax refund toward that.
Consider treating yourself with a small portion of your tax refund. Studies show that spending money can actually help you reduce impulse purchases. By including a "fun money" category in your budget, you can spend responsibly and freely (until you’re out of cash) rather than binge shop when you feel overly restricted.
If you’re still feeling overwhelmed, try going back to basics with money management 101: start planning ahead to save on your taxes next year.
1. Top up your emergency fund
While some people may not need an emergency fund, most Canadians would benefit from setting aside three to six months of living expenses.
- Calculate how much you want to set aside.
- Put your tax return into a high-interest savings account (HISA).
- Make a plan for saving the rest via monthly contributions.
It’s very important to choose a bank account that is built for the way you’re using it.
If you’re saving, choose a HISA with a great interest rate that will boost your funds while giving you immediate access to funds.
If you’re spending, choose a low or no-fee chequing account that won’t charge for features you don’t need.
2. Pay off consumer debt
To decide which consumer debt to pay off, you first need to understand good debt vs. bad debt:
- Good debt: Student loans, real estate
- Bad debt: Car loans, credit card debt, payday loans, unpaid utility bills
If you have consumer debt, apply your refund to the account charging you the highest interest.
Not only do you get the benefit of paying off your debt, but you might also increase your credit score. If you’re drowning in debt, you may want to look into debt consolidation.
3. Invest – in your future or your child’s future
Do you know how much you’ll need for retirement? If you’re like most Canadians, you probably don’t have enough socked away yet - especially if you factor in rising inflation and tariffs.
Start by trying our retirement savings calculator to find out how much you need to save.
RRSPs are a good place to start if you’re investing in your own retirement. RRSP contributions reduce your taxable income by shifting the tax burden to your future self. When you’re taxed on your withdrawal in retirement, you’ll probably be in a lower income bracket (and you’ll pay less tax).
To invest in your future:
- Open a tax-advantaged account like an RRSP or TFSA
- Max it out up to the contribution limit
- Invest those funds in a balanced portfolio
- Tap into employer matches if available (it’s free money!)
- Continue investing as often as you’re able
To invest in your child’s future:
- Open an RESP
- Add your tax refund
- Invest your money into options like GICs, ETFs, stocks, and bonds
- Continue contributing up to $50,000
Your child can withdraw RESP money to pay for their education – or transfer it to their own RRSP.
If you’re totally new to investing, start by learning the basics of the stock market and how to buy stocks. You may also want to look into less risky investments like Guaranteed Investment Certificates (GICs) to help balance out your stocks.
It’s important to understand you have various options to help you manage your investments in Canada, such as robo advisors and online brokers.
Remember: one of the best gifts you can give your children is to set yourself up for financial stability in old age. Investing in yourself is good for everyone.
4. Save it for a good reason
You may be working toward saving up a down payment on a house. Perhaps you’re saving for a renovation or a trip abroad. Maybe you’re saving for a car, or maybe you want to forego the car and get an electric bike.
Saving money is hard work – and it can take a long time. Use your tax refund to reach your savings goal faster.
- Buying a home: Contribute to a First Home Savings Account – the best FHSA in Canada right now is the EQ Bank FHSA Savings Account, thanks to its excellent interest rate.
- Projects and trips: Put your tax refund in a HISA or TFSA to earn interest as you save up enough for your new kitchen or summer vacation.
Whatever your goal, make sure you:
- Put your money in a tax-advantaged account. This means that all returns you earn in the account are tax-free.
- Can withdraw your money when you need it. GICs are time-locked, stocks can change value, and FHSA funds can only be withdrawn for down payments.
5. Spend it for a good reason
There’s nothing wrong with spending money – but some ways are smarter than others.
Smart ways to spend your tax refund include:
- Improving your home: Tackle that home renovation project that irks you. Even better, make a change that’s good for accessibility, improves your energy efficiency, increases your resale value, and is eligible for rebates and tax credits.
- Replacing your electronics: The best time to buy a laptop is before yours dies.
- Taking a vacation: Work/life balance, the coming trade wars – there are many reasons to peruse travel sites for a deal.
- Making donations: Donating can reduce your tax burden and it makes an immediate impact to help your community.
Of course, you could also indulge in a grocery delivery service to celebrate your money management skills while eating a whole cheesecake on the couch.
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$25 GeniusCash + Delicious meal choices with fresh ingredients + Front-door delivery.When you’ll get the money
The CRA doesn't start processing tax refunds until the end of February.
The date you receive your tax refund depends on how you file your return:
- File an online return: You'll receive your refund within 2 weeks
- Filed a paper return: You'll receive your refund within 8 weeks
You can check CRA processing times or check the status of your tax refund by contacting the CRA. Make sure you wait eight weeks if you live in Canada or 16 weeks if you're outside Canada.
How you’ll get the money
You may be sent your tax refund via cheque or direct deposit.
- Cheque: You'll receive a cheque at the mailing address you included on your tax return. You can cash a Government of Canada cheque at any bank for free if it’s under $1,750. You must show ID.
- Direct deposit: You may already be enrolled in direct deposit. If you’ve ever received a payment from the Government of Canada to your bank account, you’re enrolled. If not, you can sign up or update your account online.
Be aware that if you owe money to the government or your wages are garnished, you may not receive any or all of your tax refund.
FAQ
What should I do with a large tax refund?
If you receive a large refund, consider allocating portions to your retirement savings, pay down debt, explore investment opportunities, add it to your savings, or do something to treat yourself. Financial growth and personal satisfaction are both equally important.
What should I do with a small tax refund?
If you get a small tax refund this year, put your financial health first by paying off debts or saving for the future. Even a modest amount can boost an emergency fund or be used for a future purchase.
When will I get my tax refund?
The timing of your tax refund depends on how and when you file. People who file electronically typically get their refund within two weeks, while paper filings can take eight weeks. Setting up direct deposit can expedite this process.
What is the maximum tax refund you can get in Canada?
There’s no maximum tax refund amount. Refunds depend on the difference between what you've paid in annual taxes versus how much you owe, including deductions and credits. You can plan ahead to get a better refund next year.
Will the CRA take my tax refund?
If you owe money to the government or your wages are being garnished, the CRA may retain and apply your refund to your debt. It can garnish 50% of an employee’s wages and 100% of a contract worker’s wages.
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