A lot of people approach tax season with excitement for no reason other than the expectation of a refund, often a hefty one. For some, they feel they have worked all year toward it, so why not expect something back? For others, the expectation exists simply because they believe that filing a tax return should naturally result in a refund.
Admit it. A tax refund feels good because it feels like a reward. For some people, it even feels like proof that they “did their taxes right.”
For many immigrants, this expectation is shaped by something else entirely. In some countries, tax refunds are rare, unclear, or simply not part of the system at all. So when you arrive in Canada and hear people talk about refunds every year, it starts to feel like a normal outcome, almost like an entitlement.
A refund is not a bonus. If it were, it would be taxed, as it would qualify as income. It is also not a “benefit” in the traditional sense of the word. Benefits are payments designed to support individuals and families in specific situations (for example, low-income earners or people living with disabilities).
Think of a refund as a reconciliation of your income and the tax paid to the CRA. Where the latter is greater than the former, the difference is returned to you. It is quite literally your own money being paid back to you.
What a Refund Actually Is
A tax refund simply means you paid more tax during the year than you ultimately owed, and the CRA is returning the excess.
An overpayment can happen for several reasons, including:
your employer withheld more tax than necessary (either in error or based on information available at the time)
you worked only part of the year, meaning your income fell below the basic personal amount or other thresholds used in payroll calculations
you qualified for credits or deductions that were not reflected during payroll (for example, tuition credits or childcare expenses)
your income changed mid-year, such as switching jobs, receiving a bonus, or earning income for only part of the year
In most cases, a refund is not the result of a single decision, but of timing and incomplete information during the year. Payroll systems are designed to estimate, not to be perfect. The tax return is where everything is brought together and corrected.
How Benefits Can Lead to a Refund
Some refunds are also driven by refundable tax credits. These are credits that can result in a refund even if little or no tax was paid during the year.
Examples include:
Canada Workers Benefit (CWB), a refundable tax credit for working individuals earning a modest income
Canada Training Credit (CTC), designed to help Canadians offset the cost of eligible training fees
Medical Expense Tax Credit, which supports individuals who incur qualifying medical expenses during the year
When these credits are correctly claimed on a tax return, they can push your total tax paid above your final tax liability, resulting in a refund.
This is one reason filing a tax return is important even in years when income is low. Many refundable credits are only accessed through filing, and without a return, the CRA has no way to assess eligibility or issue payment.
Why a Bigger Refund Isn’t Necessarily Better
This is the part many people find surprising. A larger refund often means you had less money available to you during the year than you could have. Your paycheques were smaller than necessary, and the excess remained with the government until you filed your return.
Some people prefer this and see it as a form of forced savings. Others would rather have access to their money throughout the year. Neither approach is wrong, but it is important to understand what is actually happening.
Many credits that reduce tax can be reflected during the year through the TD1 form. While this does not account for every situation, particularly where total income differs from employment income, it can reduce over-withholding. In cases where employment income represents most or all of a person’s income, this allows tax credits to be enjoyed in real time rather than months later at filing.
A large refund may feel satisfying, but it often reflects timing rather than tax efficiency. Understanding this helps shift the focus from the size of the refund to whether tax deductions during the year were reasonably accurate.
A More Useful Way to Think About Refunds
Instead of asking, “How big is my refund?” a better question is, “Did I pay roughly the right amount of tax during the year?”
A small refund or a small balance owing usually means deductions were fairly accurate. Large swings in either direction often signal changes in income, credits, or deductions that could be adjusted going forward.
When you understand this, refunds stop feeling mysterious and owing stops feeling personal. There is no such thing as a “magic refund.” There is simply a system designed to estimate during the year and reconcile at the end.