Registered Education Savings Plans (RESP)

Registered Education Savings Plans (RESP)

General

  • The subscriber of an RESP plan makes contributions for a beneficiary (usually their children or grand-children) to help save for post-secondary education.
  • Unlike the RRSP, contributions made for an RESP are not deductible
  • There is a life-time contribution limit of $50,000 per child; however, there are no limits to how much a person can contribute in a given year.
  • RESP’s generate interest income and grants which are taxed in the hands of the beneficiaries (the children)

Special Grants under RESPs

If you are saving for a child’s education, the Government of Canada provides special saving incentives only available if you have an RESP.

1. Canada Education Savings Grant (CESG)

  • This is provided to everyone who saves for education; regardless of income level
  • The government pays a grant based on the amount contributed to an RESP for the child.
  • The government will deposit the CESG directly into the child’s RESP.
  • The government will contribute 20% of your annual contributions to all  RESPs to a maximum CESG of $500 for each beneficiary; for a lifetime limit of $7,200 for each beneficiary.
  • Therefore to get the full $500 per year, must contribute $2,500 per year.
  • Some beneficiaries may qualify for additional CESG, if they are from lower income families

2. Canada Learning Bond (CLB)

  • Incentive of up to $2,000 to helpmodest-income families 
  • deposited directly into the child’s RESP.

What if the beneficiary does not end up pursuing a post-secondary education?

  • The principal amount is refunded tax free
  • The additional income earned in a RESP is taxed
  • The government takes back the CESG
  • RESP can be transferred to a sibling of the beneficiary on a tax free basis provided that the sibling receiving the RESP is under 21 years of age before the transfer is made

Spread the Word!

Share on facebook
Facebook
Share on google
Google+
Share on twitter
Twitter
Share on linkedin
LinkedIn
Share on reddit
Reddit
Share on email
Email
Share on whatsapp
WhatsApp
Scroll to Top