Financial Insights That Matter
It’s worth remembering that a tax refund from the Canada Revenue Agency (CRA) is no different from the change you get at the supermarket after handing over some cash, says Ameer Abdulla, a tax partner at EY Canada.
“Functionally, a refund is your money, and it always has been your money — you are just now getting your change,” Abdulla said in an interview with Yahoo Finance Canada. “Over my years of experience, people do treat refunds differently than just getting their change. They treat it as free money or bonus money, and they typically do different things with it than they would if it was just their change.”
If you get a tax refund this year, having a strategy for what you do with it may make sense, especially given higher-than-usual market volatility and overall economic uncertainty.
Technically, anyone who files a tax return with the CRA could get a refund. A refund is due if the amount of taxes you paid during the tax year — generally through payroll deductions — exceeds the amount you actually owe after other deductions, credits and calculations.
Whether or not you get a refund depends entirely upon your circumstances, but CRA data suggest most people end up getting money back. For the 2023 taxation year, over 33 million returns were filed and over 19 million refunds were issued, Charles Drouin, a CRA spokesperson, told Yahoo Finance Canada in an email. The average return amount was $2,294, Drouin says. For the 2022 tax year, around 32 million returns were filed and around 18 million refunds issued, with an average value of $2,262.
If you’re in the minority that owe money, CRA data say the average amount is higher; so far in the 2025 tax-filing season (which began on February 8, according to the CRA), around 18 per cent of assessed returns have had a balance owing, with the average around $5,000. (Those returns could be for any tax year, not just the current one.)
As tempting as treating your refund like free money may be, financial experts generally suggest being more prudent. Most suggest paying off debt should be a priority, or, if debt isn’t an issue, investing the money according to your financial plan.
“I’ve always used the rule of thumb of let’s tackle the biggest number first,” said EY’s Abdulla. “What is that interest rate that we’re dealing with, or what’s that rate of return, or what’s the opportunity cost?”
For example, Abdulla says, someone with some credit card debt incurring 19 per cent interest, a car loan at 12 per cent and a mortgage at five per cent would be advised to use any refund money to pay the credit card debt first. “That would lead to the highest growth of net worth over time, and that would certainly lead to the best outcome over time,” he said.
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