An overwhelming majority of Canadians are feeling confident that their 2013 tax returns will take advantage of all the tax deductions, tax credits and other tax savings that may be available to them.

That’s according to the results of BMO Nesbitt Burns’ fourth annual national tax study, which was released Monday.

Moreover, over two-thirds of Canadians plan to file their taxes before the April 30 deadline, with one-quarter having already filed.

The study also found that when Canadians were asked how knowledgeable they felt about a list of issues related to their tax returns, they felt the most aware of how their income is taxed generally (77 per cent) and the tax implications of contributing to a Registered Retirement Savings Plan (75 per cent).

However, they are less confident of their understanding how investments are taxed, with only 41 per cent reporting that they are familiar with how capital gains and dividend income are treated from a tax perspective.

“It’s encouraging to see that such a large percentage of Canadians are feeling upbeat about the job they are doing in preparing their tax returns,” says John Waters, vice president, head of tax & estate planning, BMO Nesbitt Burns.

“However, understanding how investments are taxed is an important part of good financial planning. If you want to derive the maximum return from your investment portfolio, then it’s critical that you be tax smart and understand the potential tax implications that could arise when you make an investing decision.”

What are Canadians planning to do with their tax refunds this year?

The study also examined what those who expect a tax refund plan to do with the money:

  • Thirty-seven per cent will cover household bills and/or reduce their debt load (credit card balances and debt other than mortgage).
  • Twenty-eight per cent will save or invest
  • Thirteen per cent will fund vacations or purchase leisure items.
  • Eleven per cent will do home renovations.
  • Just under 10 per cent have decided to pay down their mortgages.
  • Three per cent will donate to charitable causes.

The survey was conducted by Pollara between March 14 and 17, with an online sample of 1,007 Canadians. The margin of error for a probability sample of this size is plus or minus 3.1%, 19 times out of 20.