BMO Nesbitt Burns
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An RESP is a tax-deferral plan designed to help save for a student’s post-secondary education.
An RESP is a great way to save for a child's post-secondary education. Essentially, it's 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.
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You may withdraw RESP contributions, with no income tax consequences - only the accumulated income and any Canada Education Savings Grant 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 When money is eventually withdrawn from an RESP to pay for education-related costs, the income and grant is taxed in the hands of the beneficiary, not the contributor.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.