Many of our clients (disabled Canadians and their relatives) receive sizable tax refunds ranging from $500 to $40,000 as a result of becoming approved for the Disability Tax Credit. Some are unsure what to do with this found money. The Canada Revenue Agency (CRA) does not mandate how you can spend your disability tax refund. They understand that disabled Canadians and their loved ones expect to enjoy the same level of comfort as everyone else, but have added costs associated with their disability.
Below are some suggestions on how to use this money. Remember, that it is ultimately up to you as to how you spend your money:
- Pay off Debt: Many Canadians have credit card debt, loans, or mortgages that could be paid off in part or in full.
- Invest: Canada offers two great savings plans, the Registered Retirement Savings Plan (RRSP) and the Tax-Free Savings Account (TFSA), which offer different tax advantages depending on your situation. After becoming approved for the Disability Tax Credit, a third plan, the Registered Disability Savings Plan (RDSP), becomes an option as well. The RDSP offers matching grants and bonds from the Government of Canada. Have a financial planner or accountant create a simulated financial plan so that you can choose the right savings plan for you.
- Donate to Charity: There are billions of people around the world who do not have the same luxuries as Canadians. Some are suffering as a result of natural disaster or war. There are also some Canadians who may have a poorer standard of living than yourself, suffer from life-threatening illnesses or need financial support to follow their life’s passion. There are thousands of charities out there; do some research, and pick one or more to donate to.
- Start a Business: A disability tax refund may be the start-up fund you were looking for to start the business you always wanted to.
- Home Improvement: If you have a physical disability, you could make your home more accessible for yourself or loved one. You could also renovate certain rooms in your home for resale purposes, or just to make them look nicer. Remember that you may be able to receive a tax credit for your home renovation expenses and grants to make your house more accessible.
- Travel: Escape the Canadian winter and take a trip to a tropical area. Or take a scenic vacation or cruise in Europe or the Mediterranean. Canada, too, offers plenty of travel opportunities from coast to coast. The options are endless.
- Reward Your Loved Ones: Pay for your child or grandchild’s tuition, or invest in an RESP when they are ready for school. Or buy your significant other the brilliant piece of jewellery they have had their eyes on.
- Treat Yourself: Buy that item you have always wanted, be it a new car, computer or golf club. For the women out there, take a personal spa getaway or save for your wedding.
As you can see, there are plenty of options when it comes to spending your disability tax refund. You will likely be able to pursue more than one of them. Consider the options wisely before you make a decision.