Consistently large refunds could be signal your tax strategy needs work: Christopher Liew

The Canada Revenue Agency (CRA) headquarters is pictured in Ottawa on Monday, Aug. 17, 2020. THE CANADIAN PRESS/Sean Kilpatrick

Christopher Liew is a CFP®, CFA Charterholder and former financial advisor. He writes personal finance tips for thousands of daily Canadian readers at Blueprint Financial.

If you got a big tax refund last year, you probably felt pretty good about it. Most people do. But here’s the thing: a refund isn’t a bonus. It means you overpaid the government all year and it’s just giving your money back, without interest.

Last year, the CRA issued more than $45 billion in refunds to taxpayers. That’s billions of dollars returned to Canadians who essentially gave the government an interest-free loan. I’m not saying refunds are bad, but a consistently large one is a signal that your tax strategy needs work.

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Below, I’ll walk through five ways Canadians quietly overpay on taxes and how to fix each one before it costs you another year.

1. The real cost of not using your registered accounts

This is the most common mistake I see, and it’s not even close. Canadians have access to some of the best tax-sheltered accounts in the world, and most people aren’t using them to their full potential.

With RRSPs, the biggest mistake I see is contributing during low-income years when the deduction is worth less.

With TFSAs, it’s treating them like a parking spot for emergency cash instead of investing for long-term, tax-free growth. And the First Home Savings Account is still flying under the radar entirely, even though it gives you an upfront deduction and tax-free withdrawals when you buy a qualifying home.

Every dollar sitting in a regular savings account earning taxable interest is a dollar that could be growing tax-free or tax-deferred. If you haven’t contributed to your TFSA or RRSP, that should be priority number one. As I recently wrote on CTV News, these accounts are consistently the biggest opportunity Canadians leave on the table.

2. Put the right investments in the right accounts

Using registered accounts is step one. Step two is making sure you’re holding the right assets in each one. This is called asset location, and it can save you thousands over time.

Interest income, like what you earn from GICs or bonds, is taxed at your full marginal rate. That’s the worst possible tax treatment. So those investments belong inside your RRSP, where the tax is deferred.

Canadian dividend stocks, on the other hand, get favourable treatment through the dividend tax credit, making them more efficient in a non-registered account. And growth-oriented investments that generate capital gains or no income at all are ideal for a TFSA, where the gains are completely tax-free.

3. Don’t ignore pension income splitting

If you’re retired or approaching retirement, pension income splitting is one of the most powerful tools available, and a lot of couples don’t use it. You can allocate up to 50 per cent of eligible pension income to your lower-income spouse or common-law partner by filing Form T1032 with your return.

This can pull the higher-earning spouse down into a lower tax bracket and reduce the household’s overall tax bill. It can also help avoid or reduce the Old Age Security clawback, which kicks in when net income exceeds a certain amount. I’ve seen couples save thousands per year just from this one move.

4. Adjust your tax withholding at the source

If you’re consistently getting a large refund, it might be time to ask your employer to reduce the tax deducted from your paycheque. You can do this by filing a T1213 form with the Canada Revenue Agency (CRA), requesting reduced withholding based on deductions you know you’ll claim, such as RRSP contributions, child-care expenses, or employment expenses.

Once approved, the CRA will authorize your employer to withhold less tax. That means more money in your pocket each pay period instead of waiting 12 months for a refund. It’s your money. You should be using it throughout the year, not lending it to the government.

5. Review your past returns

An H&R Block Canada survey found that 65 per cent of Canadians didn’t know they could amend past returns to claim missed credits and deductions. And through its Second Look service, H&R Block found unclaimed benefits for about half of the returns it reviewed, averaging $2,900 per person, so it’s a meaningful amount.

You can request adjustments going back 10 years through the CRA’s My Account portal. Common misses include medical expenses, the disability tax credit, the Canada Workers Benefit, and child-care deductions. I covered five of the most commonly overlooked credits in a recent CTV News article, and it’s worth a read if you haven’t reviewed your past returns.

Final thoughts

Paying less tax isn’t about finding loopholes. It’s about using the tools the system already gives you: registered accounts, income splitting, proper asset location, and making sure you’re claiming everything you’re entitled to. The April 30 deadline is a month away. Take the time now to make sure you’re not leaving money on the table.

Read more from Christopher Liew:

• The biggest tax and benefit changes for 2026 you shouldn’t be sleeping on
• Here are 5 tax credits and deductions Canadians are missing out on
• Canada tax brackets 2026: What’s changed and how to pay less
• How Trump tariffs could affect Canadian stocks and investments
• How much should you have saved to retire at 60?