A Big Tax Refund is NOT a Good Thing! | Michelle Levesque

June 22, 2021

This post is presented by Financial Advisor, Michelle Levesque

Getting thousands back at income tax time is NOT a good thing! So many get excited for their return. But essentially all you are doing is “lending” the government your own money, then they are giving it back to you each spring.

You should be aiming to break even at the end of each tax season. If you are getting a sizable refund that means you paid too much income tax throughout the year. Talk to your payroll person and get them to decrease the amount of taxes taken per pay cheque. Take the surplus you would have paid to CRA and invest it in a TFSA. Get your money gaining tax free growth, rather than having it sitting in CRA’s account.

If you are paying into RRSPs and getting a big refund, stop contributing to that RRSP or decrease your contribution amount. For example…if you put $1000 into an RRSP when your marginal tax rate is 30% and you get $300 returned to you at income tax time, the RRSP did not serve you in the way it needs to. You didn’t need that tax break if you are getting it all back.

On the other hand, if you do not get that $300 returned to you that means you owed CRA $300 so now you will not need to pay extra in. Therefore, the RRSP did its job and got you the tax deduction you needed.

We only generate 18% of our income yearly for RRSP contribution room. Don’t waste it during a time you don’t need it. You may be earning more in the future and really need that room! For example: If your marginal tax rate is 30% now, you will get a $300 deduction if you contribute $1000 to an RRSP. If in the future your marginal tax rate is 40% because you are earning more, you will get a deduction of $400 when you contribute the same $1000.

Don’t give the government a dollar more than you owe them!

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Until next time!

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I have been guiding individuals and business owners financially since 2008. I chose to represent Front Gate Financial Group, a local brokerage, which offers every bank and insurance company. I do not believe in being biased or product pushing for one particular company since all companies can have competitive products at any given time. I review each individual’s entire financial circumstance, educate, then shop the market for the best in all areas. You deal with one person you trust and know you have the best in all areas.

My favourite part of being a Financial Advisor is educating and empowering people financially. There’s nothing better than having a new client tell me they are no longer overwhelmed and confused by their finances and are excited by the game plan we have put in place to budget, pay down debts, protect their family, and reach their goal of retiring comfortably.

Over the years I have been asked to give financial education presentations at numerous groups and events including: Fredericton Area Women’s Business Network, International Women’s Day, Mom Talk NB, the Oromocto Chamber of Commerce, Fredericton Regional Family Resource Centre, Military Family Resource Centre, Wedding Shows, Facebook groups. I am currently the Financial Pro for Mom Talk NB providing monthly articles and live discussions.

I am married, have a little fur baby and a beautiful daughter. I enjoy travelling with my husband, painting, scuba diving, snowboarding, yoga, and walking my pup. Quality time with family and friends is everything!

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