RESPs

RESPs

A Registered Education Savings Plan (RESP) is a tax-sheltered plan registered with the Canada Revenue Agency (CRA) that can help families save for their children’s post-secondary education.

Contributions made to an RESP grow tax free until the funds are withdrawn to pay when the beneficiary is registered at a qualifying educational program.

The Basics

To open an RESP, you will need the child’s Social Insurance Number. At the time the RESP is opened, the child must be a resident of Canada.

There are two types of RESPs, individual and family. An individual RESP can be opened by anyone for anyone. A family RESP can be opened by parents or grandparents of the children and can be withdrawn in the name of any beneficiary named to the plan.

Key terms

  • Beneficiary: The student using the RESP for their post-secondary education
  • Subscriber: The person who opens an RESP on behalf of the beneficiary

Key facts

  • Contributions:
    • Lifetime contribution limit for each beneficiary (child) is $50,000. There is no annual limit.
    • If you cannot make a contribution in any given year, you may be able to catch up in future years – up to $5,000 if carry forward room is available
    • Contributions are not tax-deductible
  • All the money in an RESP grows tax-free until withdrawn and will be taxed in the hands of the beneficiary, who will typically have little income as a student and will likely pay minimal or no tax on the withdrawal
  • You can hold a variety of investments in an RESP, including mutual funds
  • The basic CESG provides 20 cents on every dollar you contribute, up to a maximum of $500 (20% of the first $2,500 of annual contributions per beneficiary) per year
    • $7,200 Lifetime CESG maximum per beneficiary
    • CESG paid into a Family Plan RESP may be used by any beneficiary of the RESP to a lifetime maximum of $7,200 per beneficiary
  • Additional CESG available to lower income families
    • $600 For family income <$46,605: $500 (Basic CESG) + $100 (an additional 20% on the first $500 of annual contributions per beneficiary)
    • $550 For family income between $46,606 and $93,208: $500 (Basic CESG) + (an additional 10% on the first $500 of annual contributions per beneficiary)
  • CESG eligibility criteria:
    • Beneficiary and subscriber must have a valid SIN and be a Canadian resident
    • Contributions must be made before the end of the calendar year in which the beneficiary turns 17
    • Special rules apply to beneficiaries age 16 and 17
Dollar amounts are updated annually based in part on the rate of inflation.