Maximize your RRSP contribution this year to help generate a healthy tax refund...then put that money to good use!
TORONTO, Jan. 18 /CNW/ - This year more than 10 million Canadians will file their income taxes and many will eagerly await their tax refund. In 2009, the average Canadian got back approximately $1,400 on their 2008 income taxes. Canadians can maximize their tax refund this year by contributing to a Registered Retirement Savings Plan (RRSP) before the March 1, 2010 deadline.
Tina Di Vito, Director, Retirement Strategies, BMO Financial Group, offers the following advice on how to make the most efficient use of your 2009 tax refund:
"Maximizing your income tax refund by contributing to your RRSP is the first step," says Di Vito. "Depending on your personal situation, there may be several ways to make the most efficient use of the money you get back. Meet with a financial planner to determine the best approach for you."
Top 5 Ways To Make Best Use Of Your 2009 Tax Refund:
Pay down your RRSP loan
Take out a BMO RRSP Readiline loan to maximize your RRSP contribution and generate a larger refund. Then use your tax refund to pay back or pay down the loan. The low interest on a BMO RRSP Readiline loan (as low as Prime +1) and flexible repayment plan make it easy to top up your contribution this year and get back more of your tax dollars.
Pay down credit card debt
High interest on some credit cards can eat away at your savings. Reduce the cost of credit by using your tax refund to reduce or pay down your credit card balances, targeting the highest rates first and transferring the balances to a lower rate credit card.
Lump sum mortgage payment
If you have a mortgage, it is a good idea to use your tax refund to make a lump sum payment. Applied directly to your principal, a lump some payment (BMO allows you to pay up to 20 per cent of your original mortgage principal per calendar year) could save you thousands of dollars in interest costs over the life of the mortgage.
Top-up your TFSA
If you are not carrying any extra debt then make your refund work for you. Contributing to a Tax-Free Savings Account (TFSA) can let you grow your money tax free. Even if you maxed out your TFSA contribution in 2009, you have room for an additional $5,000 this year.
Save for education
An education can be an expensive thing. Contributing to a Registered Education Savings Plan (RESP) can help alleviate some of the pressure that all parents feel when planning for their children's future. Consider opening a RESP using your income tax refund. A $2,500 dollar contribution to an RESP can earn a $500 grant from the government. Maximize your contributions every year and you could earn up to $7,200 in grants for every child.
SOURCE BMO BANK OF MONTREAL
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