Big tax refund - maybe NOT a good thing??
People are usually overjoyed when they learn they'll receive a big refund on their taxes - kind of like some sort of bonus or free money. But a large refund, in fact, isn't necessarily all good news!
If you have a refund on your taxes, you are just getting back money that rightfully belonged to you all along. In many cases, it just means that you were kind enough to lend the government your money, to use interest-free, throughout the year (how very generous of you!). It likely came from having too much tax deducted from each pay given the credits and deductions you were able to claim.
Sometimes a big refund is created on purpose (ie. borrowing money to make a large RRSP contribution near the deadline, to trigger the refund which repays part of that loan) - those kinds of planned refunds make sense.
But otherwise, while getting a big refund might feel like a windfall at the time, it may indicate an opportunity to do some better tax planning or revisit your TD1 forms with your employer where you indicate the tax credits you have. This way, you could keep more of your own money throughout the year (and save it in a way that earns you interest!), rather than lending your hard-earned dough to the government until tax time.
Also in Tax Tips
To Depreciate or Not, That is the Question!
Can I Write Off My House?
