Maximizing your 2024 tax return 

^{Bromwich+Smith staff | Reading time: 4 minutes and 28 seconds | 897 words | Date: 2024/02/22}

Tax season is fast approaching and for many it brings up many emotions. Some of us resent having to pay taxes, others find satisfaction in contributing to community services. Maybe you dread having to pull together all the necessary information, or maybe you have a professional do it for you! You may find yourself excited about a possible refund, or you may be concerned about owing money.  

If you find that you owe taxes, it’s important to understand the payment requirements. If you receive a refund, how you choose to spend it can have a significant impact on your financial health. Let's explore some strategies to make the most of your tax return and what you can do if you believe you will owe money this year.  

What if I am eligible for a tax refund 

Before you can decide how to spend your tax refund you must first understand your current financial situation. What are your immediate financial means and requirements? Do you have outstanding debt? How about short or long term savings goals? 

Debt repayment 

If you have outstanding debt, consider allocating a portion of your tax refund to repayment. Prioritize paying off high interest debts as they grow the fastest. The faster that you can reduce these debts the more money you will save in the long term.  
 
If you are currently enrolled in a debt repayment plan like a Consumer Proposal, consider allocating your tax return towards your repayment to speed up the process and ensure an earlier discharge date. Speak to your Licensed Insolvency Trustee about how to repay your proposal earlier and ask them about the positive effect that will have on your credit. 

If you currently have a mortgage or car payment, extra payments from your tax refund could reduce overall interest and shorten the life of the loan. Make sure to check with your lender, to identify any fees there may be for early repayment. 

Invest in your future 

There are many ways to prepare for the future, and one of the most important is an emergency savings fund. We recommend keeping a minimum of three months of living expenses available in cash that you can access immediately in the case of an unexpected event like a job loss, or medical situation that may hinder your ability to work. This financial security net could also help to cover any future unexpected expenses, like an emergency car or home repair. If you do not currently have an emergency savings account, allocate a portion of your tax refund to start one.  

Contributing to retirement or education savings is another good way to maximize the impact of your tax refund. Everyone plans to retire sooner or later, and when it comes to saving, earlier is always better. For those who have or plan to have children, a post-secondary education is a significant expense. Setting aside money will help support them as well.  

You may want to invest your return in stocks or mutual funds with the hopes of generating long term returns. Consulting with a financial advisor will help you determine the best strategy based on your risk tolerance and your long-term financial goals. Putting money aside into your RRSP accounts will not only help you grow them you will also see a tax break on your 2024 tax return. 

Investing in your home enhances its value while also improving your quality of life. You may want to upgrade to energy efficient appliances or install solar panels, both of which can result in long term savings. While you have the additional funds it is wise to take an inventory of your larger household appliances like the furnace, washer and dryer, or hot water tank. By having them serviced regularly or replacing them when you notice they are starting to age, you may save an emergency situation later on. 

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What if I owe taxes 

If you believe you will owe money this tax season it may be tempting to avoid filing in the first place. Filing your taxes on time will avoid additional interest and penalty charges, and the longer you put this off, the more you will end up owing. If you have not filed the current year's taxes, you may delay receiving government payments which could be essential income. Being on top of your taxes is also essential when applying for credit like a loan or mortgage.  
 
If you believe that you will owe more than you can pay immediately, it is still important to file on time. Contact the Canada Revenue Agency immediately and directly to discuss repayment options. If you are struggling with CRA Debt, contact a Licensed Insolvency Trustee to learn about  debt relief options available to you. 

How you decide to allocate your 2023 tax refund can have a huge impact on your finances for 2024. Take some time to review your current financial situation and your upcoming goals to determine how to maximize your tax refund this year. Reviewing your situation with a financial advisor or Licensed Insolvency Trustee can provide individual tailored solutions to your unique financial situation. 
 

Bromwich+Smith has a number of debt relief strategies to help you regain control of your finances and get your life back on track. Reach out today for a free, confidential, no obligation consultation. Bromwich+Smith’s Debt Relief Specialists are available by phone at  1-855-884-9243, Live Chat  or you can request a call back at contact us page. We want to see you flourish!