You’ve just filed your tax returns and you think you’re eligible for a tax refund. If you are, have you thought about how you’ll use it? They say money can’t buy happiness, but here’s how it could improve your quality of life.
1. Pay off your high-interest debts.
There’s good debt and there’s bad debt. For example, there’s generally no need to rush to pay off your mortgage if you have an excellent rate and your property value is going up each year. But high interest on an unpaid credit card balance, a personal loan or some car loans can really eat into your monthly budget. You could use your tax refund to pay down high-interest debts faster and potentially reduce your financial stress.
2. Set aside an emergency fund.
Some sudden events, like a job loss, a vehicle breakdown or emergency home repairs, can be a source of personal and financial stress. An emergency fund that covers the equivalent of 3 to 6 months of living expenses can help protect you from unforeseen expenses or a temporary drop in income. It can also save you from going into debt and having to rely on credit. You might want to keep your rainy day fund in a tax-free savings account (TFSA)1 to take advantage of tax-free returns and withdrawals.
3. Contribute to your RRSP1 (maybe more than once)!
If you have unused contribution room in your registered retirement savings plan (RRSP), why not use this tax refund to get a head start on your planned RRSP contributions? This could position you to get another tax refund next year, which means that your RRSP would be essentially “paying for itself,” at least in part. By contributing earlier in the year, you’ll also earn a few extra months of returns.
This will give you peace of mind knowing you’re on the right track to achieving your retirement goals or buying your first home with the Home Buyers’ Plan (HBP)1. You can also combine this strategy with a tax-free first home savings account (FHSA)1 (see strategy 5).
4. Use your TFSA to save for the future.
A TFSA lets you grow your savings and make withdrawals tax-free. This makes it an effective and powerful savings tool to help you save for your short- and medium-term goals—and even for retirement. Before you contribute to your TFSA, check your contribution room. You can use your TFSA to renovate your home (like replacing old windows, upgrading your kitchen or setting up a home office), make a major purchase (like an electric vehicle) or take a well-deserved vacation.
Good to know: You can reinvest in your TFSA any amounts that you previously withdrew from it. That’s because any withdrawal creates contribution room for the following year.
What's the deadline for filing your tax return?
The deadline to file your 2025 tax returns is April 30, 2026. However, if you have business income, you have until June 15, 2026. (Sources: Canada Revenue Agency and Revenu Québec)
5. Contribute to your FHSA to save up for your first home.
If becoming a homeowner is one of your goals, you might want to consider opening an FHSA. It’s a great way to save up for a down payment on your first home. Your FHSA contributions can be deducted from the taxable income on your tax return. Your savings earn tax-sheltered returns until you use the funds to buy a home. Under certain conditions, you won’t have to pay tax when you eventually withdraw the money—as long as you use it to buy a first qualifying home. Unlike the HBP, you don’t have to repay the withdrawn amounts. You can also use the FHSA in combination with the HBP.
6. Take care of your well-being.
What other area of your life could use some extra investment? Depending on your needs, you may want to consider using your tax refund to improve your physical or mental health. For example:
- Sign up for a gym membership or buy quality equipment to take up a new sport.
- Buy a more comfortable ergonomic chair and desk for your home office.
- Consult a nutritionist to help you adopt better eating habits.
- Get help from a specialized therapist if you have anxiety or a sleep disorder.
Listen to your body and your mind to find out what makes you feel good.
7. Invest in your well-being and your passions.
Learning how to manage stress, finding ways to stay organized in your day-to-day life, or simply building resilience can be useful both at work and at home. Consider pursuing a personal interest by taking a class in music, painting, photography, dance, a sport or any other activity you find inspiring.
8. Donate to a cause that’s important to you.
Giving generously to a charity that reflects your values can be a great source of joy—and offer you tax benefits at the same time. Charitable donations are eligible for a non-refundable tax credit. That tax credit becomes bigger if your donations total more than $200, so it’s better to combine the donations of both spouses and only have one spouse claim the credit. Make sure you have all the details about the cause you want to support and how your money will be used.
Good to know: Donations can be carried forward to any of the next 5 tax years.
Direct deposit: Easier, more reliable and faster than a cheque
Sign up for direct deposit to have your tax refund deposited directly into your account. It’s usually faster!
For many people, a tax refund is like a bonus. Take advantage of this opportunity to improve your financial situation or invest in things that make your life better.
1 Certain terms, conditions and restrictions may apply. For more information about these plans, visit any of the following pages:
TFSA: https://www.desjardins.com/en/savings-investment/savings-plans/tfsa.html
RRSP: https://www.desjardins.com/en/savings-investment/savings-plans/rrsp.html
HBP: https://www.desjardins.com/en/mortgage/home-buyers-plan.html
FHSA:https://www.desjardins.com/en/savings-investment/savings-plans/fhsa.html