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It’s tax time, and while some of us are receiving refunds, others likely have some cash they need to pay back to the Canada Revenue Agency (CRA). With interest rates on the rise, and inflation still high, it’s perhaps the worst timing imaginable.

Yet, what if I told you there was a possibility to make all that cash back within this year?

Of course, it depends on what you owe

If you’re behind and having to pay tens of thousands to the CRA, I’m sorry but I likely can’t help you. However, if you have a couple of thousand that you want back in your pocket in 2023, there I can be of service.

There are a few options, but let’s start with the best one. That’s the Registered Retirement Savings Plan (RRSP). There are multiple benefits to opening an RRSP, but perhaps the most pressing comes down to the tax that comes off your net income. For every dollar that you put towards your RRSP, that cash comes off your taxable income. This can bring you down to an entirely new tax bracket!

Granted, this isn’t putting cash in your pocket now. But it’s an important method of saving on taxes owed for next year. Never mind that you’re now setting yourself up for a strong retirement.

Now, back to cash on hand

Let’s say you owe about $7,000 to the CRA this year. You want to make that back by the end of 2023, so you can then put the cash aside and keep it ready for next year’s taxes. If this sounds like you, then I certainly have some options.

It’s a rough year, but by the end of 2023 the market will be on the rise again. Which is why now is a great time to consider dividend stocks that are down. There are plenty with high dividend yields that will see great returns this year, including Canadian Imperial Bank of Commerce (TSX:CM).

Yes, banks tend to do poorly in a recession. Yes, CIBC stock is down the furthest of these stocks right now. But it therefore also has a lot to gain in the coming months when the recession ends. So next, we’re going to see how much income you could bring in, and what your returns could look like.

Investing in CIBC stock over eight months

So we have about eight months to make $7,000. Not an easy achievement, but still achievable if you have cash put aside in your Tax-Free Savings Account (TFSA), RRSP, or other investment portfolio. Shares of CIBC stock currently trade at 11.4 times earnings, providing a solid deal, and are down 22% in the last year.

Let’s say you made your purchase now, with the goal of seeing shares return to 52-week highs. That would see shares return to $74 per share as of writing. So you’ll have returns this year to look forward to, but also passive income from its 5.96% dividend yield. Here’s what you would then have to invest to create $7,000 in returns in 2023.

You’ll notice the total is far more than the $7,000 needed from investing about $25,000 in CIBC stock. That allows you wiggle room in case shares don’t make it to 52-week highs. You’ll have $1,465 in passive income to then make up the difference. And could certainly still go beyond the cash you hoped for from investing in CIBC.

The post Owe Big Taxes? How to Make Your Cash Back This Year appeared first on The Motley Fool Canada.

More reading

• 3 Easy TSX Stocks for Beginners in April 2023
• Young Investors: 3 Best Dividend Stocks to Buy in April 2023
• 3 Dividend Powerhouses to Buy for Reliable Passive Income
• How to Pay Off Debt and Get Rich in 20 Years
• Better Buy: CIBC or Bank of Nova Scotia?

Fool contributor Amy Legate-Wolfe has positions in Canadian Imperial Bank Of Commerce. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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By: Amy Legate-Wolfe
Title: Owe Big Taxes? How to Make Your Cash Back This Year
Sourced From: www.fool.ca/2023/04/12/owe-big-taxes-how-to-make-your-cash-back-this-year/
Published Date: Wed, 12 Apr 2023 19:30:00 +0000

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