With the March 1 RRSP contribution deadline looming, Bank of Nova Scotia asked investment decision-makers how they would allocate a hypothetical $1,000 tax refund.

The study found that the typical person would allot about a third of their refund to pay off debt, while an equal proportion would be put into a savings account or into investments.

“The emphasis placed on debt repayment as well as building up their savings and investments points to an overall desire on the part of Canadians to rebalance their personal balance sheet as the economy slowly continues to improve,” says Adam Salahudeen, senior manager, taxation advisory services, Scotiabank.

While respondents in every region of the country indicated they would allocate the greatest proportion of their tax refund to debt repayment, there are some regional differences with respect to saving and investing priorities.

Prairie and British Columbia residents place a higher priority on allocating part of their tax refund to savings over investments.

Saving versus investing allocations are most evenly split in Ontario, while Quebec investors are the most likely to allocate some o their refund to a vacation or spend it on their home.

The study also found that while males and females give priority to paying off debt, women are significantly more likely to deposit money into a savings account rather than investing it, while men are evenly split between saving and investing.

Attention turns to tax credits

Regarding the upcoming tax season, the study also found that many Canadians are turning their attention to their tax returns and the tax credits available to them.

Four out of five of those surveyed indicate they have or plan to take advantage of available tax credits this year.

The charitable tax credit is the most widely used (49%), followed by the home renovation tax credit (38%) and the medical expenses tax credit (36%).

“It’s encouraging to see so many Canadians using the tax credits available to them in an effort to reduce their taxes this year,” says Salahudeen.

“It’s also good news for charities that the charitable tax credit is so well-used by Canadians. They should also keep in mind that it can be an effective planning tool to minimize taxes for clients who are expecting large capital gains or, on the flip side, would like to donate to charity stocks that are underperforming well below their original price,” he adds.

It is somewhat surprising, Salahudeen observes, that only 13% of those surveyed have used or plan to use the transit pass tax credit or fitness tax credit, which enables parents to claim for eligible activities that their children are involved in, and reminds Canadians to ensure that they are taking advantage of all of the tax credits available to them.

It is also interesting to note that only 16% of indicate that they have or expect to take advantage of eco rebates available to them under the Energy Efficient Housing Program or the Government of Canada’s ecoENERGY Retrofit Program.

The survey was conducted for Scotiabank by TNS Canadian Facts.

IE