Education Planning

Registered Education Saving Plans (RESPs)


An RESP is a great way to save for a child's post-secondary education. Essentially, it is a tax deferred savings plan that you open on behalf of a future post-secondary student. While RESP contributions are not tax deductible, the income earned on contributions compounds on a tax-deferred basis. RESP contributions may be made for up to 21 years - to a lifetime maximum of $50,000 per beneficiary.

An RESP terminates when all the funds have been withdrawn or 25 years after the plan was opened, whichever comes first. You may withdraw RESP contributions, with no income tax consequences - only the accumulated income and any Canada Education Savings Grant (see below) in the plan is taxable. When money is eventually withdrawn from an RESP to pay for education-related costs, the income and grant is taxed in the hands of the beneficiary, not the contributor. If the student withdraws the money over a few years, the income should attract little or no tax.

Canada Education Savings Grant (CESG)


One attractive feature of RESPs is the Canada Education Savings Grant (CESG). On the first $2,500 of annual RESP contributions that you make for each child up to and including the year they turn 17, the government will contribute an extra 20 per cent directly to the RESP. The maximum CESG available for any single year is $500 (20 per cent of $2,500). However, if a contribution is not made in a given year, the $2,500 CESG contribution room is carried forward. The maximum lifetime CESG for each beneficiary born after 1997 is $7,200.

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