Registered Education Savings Plans (RESPs)

RESPs are registered accounts that enable you to make contributions now towards the cost of a child's future education. Unlike an RRSP, your contributions are not tax deductible but the funds grow tax-sheltered until paid out to the beneficiary.

Below are the features of RESPs, including the Canada Education Savings Grant introduced in the federal budget on February 24th, 1998, federal budget changes introduced in 2007 and 2008:

Contributions:

  • Contributions are $2,000 per year from 1998 (or the year of the child’s birth, whichever is later) to 2006 inclusive, then $2,500 contributions for 2007 onward

  • You can contribute up to 31 years to a lifetime maximum of $50,000 per beneficiary

  • No contribution carry forwards

  • No tax deduction for contributor

  • Amounts contributed above $5,000 in a given year will not attract grant for years 2007 onward

Canada Education Savings Grant (CESG):

1998 to 2006: Annual amount added to grant room $400
Basic CESG annual limit $800
2007 or later: Annual amount added to grant room $500
Basic CESG annual limit $1000

The amount of annual Basic CESG payable per beneficiary is limited to the lesser of the following two amounts:

                ·        Accumulated grant room available for the beneficiary, or
                ·        Basic CESG Annual Limit

  • Government will contribute up to the annual maximum of $1,000 in grant, assuming there is sufficient carry forward grant entitlement, regardless of what year the “grant room” went unused

  • Lifetime maximum CESG contributions continue to be $7,200 per beneficiary

  • Contributions for beneficiaries aged 16 and 17 will only receive a CESG subject to certain stipulations

  • CESG room may be carried forward until the end of the year a beneficiary turns 17

  • The beneficiary must be a Canadian resident and have a SIN to receive the CESG

                    

Education Assistance Payments:

  • Any income/growth earned on the contributions may be paid out to the beneficiary once they are attending a recognized post-secondary institution

  • CESG can be included in the payment

  • EAPs are taxed in the hands of the beneficiary, who reports it as “other income” on their tax return