If you haven’t already heard, tax season is upon us. In fact, the deadline for filing your taxes is just shy of the two month mark (hint its April 30 2017).
If you are making progress, yet still finalizing your 2016 tax file, there is still time to think about how you can increase your returns as much as possible. Secondly, you can also give some thought to how you will use the tax money you receive in the most effective manner. For example, why not use your tax return to pay off some of your debts?
If that sounds like a scenario you are interested in, here are 3 ways to boost your rebate and apply it to your debts.
1) Pay Off High-Interest Debt (Credit Card Debt)
One of the most challenging debts to tackle is often of the credit card variety. While one credit card can be tough enough, and since many individuals have more than one card, this can then create a even greater problem. One major reason for this is that credit cards typically carry relatively high interest rates.
Therefore, if you know you will be receiving a fairly sizeable tax return, then making a plan to use it to pay off a large chunk of your credit card debt can be extremely beneficial. Even if you don’t pay off your total credit card balance, even paying off $1000 can mean you will reduce your credit card balance enough to lower your interest charges by a few hundred dollars each year.
In the end, using your tax rebate to pay down a higher interest debt like your credit card, can be a really wise method of spending this additional money.
2) Make an Additional Mortgage Payment
A second beneficial method of putting your tax return to good use is to consider using it to make an additional mortgage payment. Normally, mortgage rules will allow for an additional mortgage payment each term, as a result this can be a very opportune time to make this payment.
An added bonus of making an extra mortgage payment is that when you do, it will come straight off the principle loan balance and not just cover the monthly interest charges. In the process, not only will you lower the total amount of your mortgage, including the amount of interest you are charged, in turn you are also likely to be able to pay off your home in a shorter amount of time.
All in all, there are many financial advantages of opting to allocate your tax rebate in this direction.
3) Pay Off Outstanding Bills
Finally, you have taken care of your credit card debt and your mortgage, and the reality is that you are likely to also have other debts that you would like to reduce. Depending on how many, as well as the nature of the outstanding bills that you have by using your tax rebate you may just be able to get out in front of more than one of them.
If you are paying down a car loan, for example, then a portion of your tax rebate could also be used to pay down your car loan as well. Again, this means that you can reduce the total amount of your loan, decrease your monthly payments and pay off the loan at an increased rate.
Ultimately, any other monthly bills you have can also be paid off using your tax return funds. Of course this depends on how much money you do receive back from your taxes, and with that being said the more you get back the more debt you can pay off.
Therefore, in order to boost your rebate you will want to pay attention to all of the tax areas that apply to you and your finances. To help ensure you do submit the most comprehensive tax file, you can refer to these areas on the Canada Revenue Agency (CRA) site as well as turn to a personal accountant for support.
Subsequently, you can also look into filing your taxes electronically on the CRA site, relying on their step by step guidance. These online filing options can also provide a thorough method of completing your taxes, helping to ensure you don’t miss out on including some important and refundable tax areas.
On a final note, there are many approaches you can use in order to boost your tax return, as well as a variety of specific ways it can be applied to your debt. While paying down your debts is likely to be a top priority for you, this in turn can greatly benefit your finances, starting with helping to improve your credit – ultimately making your debt more manageable for the remainder of the year.