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Leverage Your Income Tax Refund as an Investment
 
What you do with your tax refund can have a major impact on the amount of money you accumulate for retirement.

To illustrate, consider if you were an investor in a 50% tax bracket and you decide to invest $1,000 in an RRSP. Let’s look at the outcomes of three different options for investing 
the $500 tax refund you would receive from your $1,000 RRSP contribution.
Option # 1: Don’t invest; spend the money instead
Here, you’re basically increasing your current standard of living at the expense of your retirement.
Option # 2: Invest your refund in your RRSP
By contributing the $500 refund, your total contribution for the year is now $1,500 instead of $1,000 – an increase of 50%.
Option # 3: Gross up
In this case, you borrow an extra $1,000 to “gross-up” your RRSP contribution to $2,000. The $1,000 refund is used to immediately repay the $1,000 loan, so you pay little, if any, interest.
 
 
By “grossing-up,” you get the maximum RRSP dollars working for each dollar you invest. For someone in the 50% tax bracket, this approach grosses-up $1,000 into a $2,000 RRSP contribution.

Get Started

We encourage you to explore the links in the right sidebar. They'll take you to articles with answers to many common tax questions. You'll also find information and ideas that will help you plan a more effective tax strategy for you and your family. If you have any questions, send us an email and we would be pleased to help.
 
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