Five ways to spend your 2024 personal income tax refund in 2025

It’s always a great feeling knowing that tax season is finally behind you. And if you filed your 2024 personal income tax return with the CRA and received a tax refund — it feels even better!

But it begs the question: how are you going to use your refund?

Here are five strategies to put your refund to good use:

1. Invest it in a Registered Retirement Savings Plan (RRSP)

Maximize your RRSP contribution to reduce your 2025 taxable income and/or to increase your tax refund. Your 2024 notice of assessment (NOA) from the CRA is a valuable document that provides important information about your RRSP contribution limit for the year 2025. It’s recommended to review your NOA each year.

2. Invest the refund in a tax-free savings account (TFSA)

While the cost of everything from groceries to haircuts continues to rise, you can help your savings keep up with the inflation by contributing to a TFSA. In other words. You won’t pay taxes on your investments made into your TFSA.

For 2025, the CRA allows you to contribute a maximum of $7,000 toward your TFSA, plus any unused room from previous years.

And aside from the tax-free growth, another benefit of investing into a TFSA is the ability to withdraw any amount contributed, at any time, without penalty.

You can find how much you can contribute to your TFSA on the previous year’s NOA. For instance, your 2024 NOA will indicate how much you can contribute in 2025. If you have a CRA MyAccount, you can sign into the website to review your NOA online.

3. Invest in your child’s Registered Education Savings Plan (RESP)

As tuitions continue to rise, investing your income tax refund into a RESP is a great way to help your child fund their post-secondary education. And as a bonus, it may help them graduate without the weight of student loan debt.

The government will match a portion of your RESP contribution. Currently they’ll match 20 percent on the first $2,500 contributed each year, up to a maximum of $500.

Additionally, the beneficiary of the RESP may also be eligible for other grants like the Canada Learning Bond and the Canada Education Savings Grant.

4. Invest in an emergency savings account

It’s a good idea to try to save the equivalent of two or three months of your net income to cover unforeseen expenses. You can start this by taking 10 percent of your net pay — or a percentage of your tax refund — and depositing the funds into a regular savings account or into a TFSA.

These funds can be withdrawn at any time, without penalty.

5. Use it to pay down — or pay off — debts

Using your income tax refund to pay down or pay off your debts is a good way to manage your finances while reducing your overall debt load.

MNP has your back

If you have questions about how to manage your income tax refund while struggling with financial stress, our Licensed Insolvency Trustees (LITs) are here to help. To learn more, reach out for a free, no-obligation consultation.