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Registered Education Savings Plan (RESP)

If you have children, you should definitely consider a RESP as an option to save for their future education expenses. You will receive a Canada Education Savings Grant (CESG) of 20% on every dollar you invest for your child’s post-secondary education up to a maximum CESG of $500 per year! You may even qualify for additional CESG if your income is low. RESPs can be set up for one or more beneficiaries and each beneficiary can receive a maximum lifetime CESG of $7,200. Withdrawals of RESP contributions are not taxable as they’re made with after tax dollars. Withdrawals of the CESG and Income earned are taxable to the beneficiary and will a trigger a T4A. Typically, most students have enough basic deductions and low enough income that they end up owing little or no tax on the taxable amount received from the RESP each year.

What happens if your child decides not to pursue post-secondary education? All contributions to the plan can be returned to the contributor tax free. The CESG paid on those contributions will be forfeited but growth and income earned within the plan can be transferred to the contributor’s RRSP, provided they have available contribution room. Alternatively, you may be able to transfer the plan to another beneficiary. Check with us for more details about the ins and outs of RESPs.

You can learn more about RESPs and other financial resources for students by visiting this CanLearn link: http://www.canlearn.ca/eng/index.shtml


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