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What are you doing with your tax refund this year?

In a somewhat surprising turn of events, I’ll actually be receiving a tax refund this year.

I had originally gone over my taxes myself using TurboTax, but came up with a $700+ refund amount. I didn’t think that could be true, given the fact that I was a freelancer for the majority of 2012, and didn’t pay taxes on the income I earned. So, logically, I thought I’d have to pay a few thousand dollars (I owed about $3,300 in taxes in 2011).  I decided to trust a professional, and hired an accountant (who came recommended) to make sure all the paperwork was being done correctly.

Well, not only was I right about getting a refund, but my accountant found me even more tax savings. So I’ll be getting $975 back. AND I’m also eligible to receive the GST credit again. This was a combination of having a ridiculous amount of business expenses this year, and having a few thousand dollars in medical expenses to claim (since I was a freelancer, I didn’t have medical benefits).

Related: How to spend your tax refund responsibly

What will I do with my tax refund? I normally like to use the 90/10 rule when it comes to tax refunds or any sort of “bonus” money I wasn’t expecting – where 90% of the money goes to something responsible – like my mortgage or saving for retirement. And the leftover 10% will be spent on something fun.

This year, I’ll be spending almost exactly 10% on a winery tour for Nic and I. We’ll be going to Mission Hill in Kelowna to sample my favourite B.C. wine this weekend. He booked us into a hostel for $25 a night, and we’ll likely be doing a bit of hiking in the area as well. :)

As for the rest of the money, since I’m already paying an extra 20% on my mortgage payments, I’m going to put it towards my retirement – likely half into my TFSA account with Questrade, and the other half into my RRSPs.

How are you spending your tax refund this year?

Author: Krystal Yee

I’m a personal finance blogger and marketing professional based in Vancouver. I’m a former Toronto Star (Moneyville) columnist, author of The Beginner’s Guide to Saving and Investing, and co-founder of the Canadian Personal Finance Conference. When I’m not working, you can usually find me running, climbing, playing field hockey, or plotting my next adventure.


Comments

  1. Tanner says:

    I dont get refunds, but with any major extra money, I try to complete as many of my yearly goals as I can and also save a bit for fun money (surprisingly, I came very close to your 90-10 rule; I put 88% to different saving goals and took 12% to start a fun fund. The percentages were unrelated, and I just found out it came to that, how curious!).

  2. Cassie says:

    I paid off the last of my car when I got my income tax return this year. Fingers crossed I’ll get another one next year, so I can do a fun/responsible split with it.

  3. Tibbs says:

    Just found your blog and am really enjoying it. I’ve always subscribed to the idea that tax refunds aren’t “found money” or bonus money, because it’s really just money that was taken away from you that shouldn’t have been. So it should be treated with the same processes that any normal paycheque because that’s ultimately where the money came from. If 10% of your income goes to a travel fund, do the same with your tax refund. If you wouldn’t burn 50% of every paycheque on Single Malt nights, you shouldn’t do it here, either.

    I typically try to max out my RRSP and TFSA as soon as possible each, so I use it to top out my TFSA (if there’s any room left by now).

  4. Alyssa says:

    I put all of mine toward our wedding fund. I’m definitely a fan of the 90/10 rule, although honestly, I’ve always saved my entire refund.

  5. Elizabeth says:

    All of mine went to extra payments against my mortgage, not much this year though about $400 which is good.

  6. No refunds here. I paid an extra $4000 above my prepaid taxes. :|

    Next year I expect a refund however, as I will max out my RRSP ($11K) which will DEFINITELY offset my lower income. Mostly the capital gains.

  7. Michelle says:

    Ours went towards my student loans. I can’t wait until they are gone!

  8. Leigh says:

    I threw mine at the mortgage! Like you, it was a bit more than I’d expected, which is a bit annoying, but it did make a nice little dent in my mortgage :) I think that I should get it closer to zero next year.

  9. keri says:

    Last year, I used the refund to fly home to visit my parents at Easter time.
    This year, I put half into my emergency fund and half was used to pay the closing costs on my first house.

  10. Ours went straight into savings!

  11. Pamela says:

    It was just $200 shy of completely paying my 6 month property tax. So there it went and it was timed perfectly!

  12. Jeff says:

    Nice! I’d love to be able to live out of the country for 8+ months, pay no income taxes and still get a $1000 tax refund in the new year.

    I owed this year but I knew I would owe something so I budgeted for it but when all was said and done I didn’t have to pay as much as I thought so I was able to earn interest (however little it was) and, in a sense, give myself a refund. Putting it all on red…. the mortgage that is!

  13. Diedra B says:

    our tax refund went into our new home/moving fund! We keep getting a tax refund so I’m debating whether to change our contributions so we have more income in our paychecks and less refund come tax time. . .

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