THE SHORT · TAX · Canada
Your $2,400 tax refund cost you $192
A big refund means $200 too much was withheld every month. The money was yours, it slept elsewhere, and meanwhile your card was running at 19.99%.
By the Yoseri News desk · · 2 min read
This article describes the rules of Canada. Income tax, pension plans and tax-sheltered accounts do not transpose from one place to another.
These are not the rules of the region you picked (): this article describes those of Canada. The reasoning holds everywhere; the account names, the caps and the ages do not.
The refund arrives in spring, it is $2,400, and it looks like a gift. It is not: it is your money, over-withheld all year and handed back without interest. $2,400 over twelve months is $200 a month that never passed through your account.
Meanwhile, your card balance was running.
| Over twelve months | Interest paid | Balance at the end |
|---|---|---|
| The $200 paid onto the card each month | $80.16 | $0 |
| The $200 held back by tax | $272.03 | $1,512.63 |
Assumptions: starting balance $1,240.60, rate 19.99%, no new purchases. The interest gap is $191.87, and in the first case the debt is gone before summer.
That is the cost of the 0% loan you granted without knowing. It shows up nowhere: not on your assessment, which only talks about tax, and not on your card statement, which only talks about interest.
The reverse exists too and costs more still: a balance owing in spring means not enough was withheld, and it arrives all at once. Both are corrected in the same place — source withholdings, which can be adjusted on request.
On Yoseri’s Debt page, an extra payment is simulated on your real lines: you see where $200 more a month lands, and what it does to your end date.
Where the figures come from
The maths in this article starts from the assumptions written above. Run them again with your own figures — you should land on the same numbers.
Yoseri News is an educational publication. Nothing in this article is investment advice, a recommendation to buy or sell, or tax advice. Yoseri is registered as neither an adviser nor a dealer with any market authority. The tax rules described here are those of Canada, and the limits change: check your own entitlements before acting.